REPRINTS  OF  ECONOMIC  CLASSICS 


THE  PHILOSOPHY  OF  WEALTH 


Also  Published  In 

REPRINTS  OF  ECONOMIC  CLASSICS 

By  John  Bates  Clark 
THE  DISTRIBUTION  OF  WEALTH  [1899] 


THE 


PHILOSOPHY  OP  WEALTH 


ECONOMIC  PRINCIPLES  NE  WL  Y  FORMULA  TED 


BY 


JOHN  BATES  CLARK 


1886 


REPRINTS  OF  ECONOMIC  CLASSICS 

Augustus  M.  Kelley  Publishers 
New  York     1967 


First  Edition  1886 
(Boston:  Ginn  &  Co.,  Publishers,  1886) 

Second  Edition  1887 


Reprinted  1967  by 
AUGUSTUS  M.  KELLEY  PUBLISHERS 


Library  of  Congress  Catalogue  Card  Number 
67-25955 


PRINTED  IN  THE  UNITED  STATES  OF  AMERICA 
by  SENTRY  PRESS,  NEW  YORK,  N.  Y.  10019 


THE 


PHILOSOPHY  OF  WEALTH. 


ECONOMIC  PRINCIPLES  NEWLY  FORMULATED, 


BY 

JOHN    B.  CLARK,  A.M., 

PROFESSOR  OF   HISTORY   AND   POLITICAL  SCIENCE   IN    SMITU   COLLEGE. 


BOSTON,  U.S.A.: 
GINN   &   COMPANY,   PUBLISHERS. 

1887 


Entered,  according  to  Act  of  Congress,  in  the  year  1885,  by 

JOHN  B.   CLARK, 
in  the  Office  of  the  Librarian  of  Congress,  at  Washington. 


PREFACE. 


IN  a  series  of  articles  in  the  New  Englander,  com- 
menced ten  years  ago,  I  endeavored  to  contribute  a 
share  toward  the  reformulating  of  certain  leading  prin- 
ciples of  economic  science.  The  traditional  system  was 
obviously  defective  in  its  premises.  These  were  as- 
sumptions rather  than  facts,  and  the  conclusions 
deduced  from  them  were,  for  that  reason,  uncertain. 
The  assumed  premises  were,  at  certain  points,  at  vari- 
ance with  facts,  and  the  conclusions  were,  to  that  ex- 
tent, erroneous.  The  better  elements  of  human  nature 
were  a  forgotten  factor  in  certain  economic  calcula- 
tions ;  the  man  of  the  scientific  formula  was  more 
mechanical  and  more  selfish  than  the  man  of  the  actual 
world.  A  degraded  conception  of  human  nature 
vitiated  the  theory  of  the  distribution  of  wealth. 

The  prevalent  theory  of  value  started  with  a  mis- 
conception of  utility,  and  of  the  part  which  it  plays  in 
exchanges.  Economic  science,  in  general,  found  no 
adequate  place  for  the  intellectual  activities  of  men, 
and  made  no  important  use  of  the  fact  that  society  is 
an  organism,  to  be  treated  as  a  unit  in  the  discussion 
of  many  processes  affecting  wealth. 


IV  PREFACE. 

The  articles  referred  to  endeavored  to  contribute 
such  share  as  they  might  toward  the  needed  recon- 
struction of  economic  theories.  They  endeavored  to 
broaden  the  conception  of  wealth,  as  the  subject  of  the 
science,  to  find  a  place  in  the  system  for  the  better 
motives  of  human  nature,  to  construct  a  new  theory 
of  value,  to  apply  at  all  points  the  organic  conception 
of  society,  and  to  suggest  other  corrections.  They 
tried,  in  general,  to  bring  the  premises  of  the  science 
into  better  accordance  with  facts,  and  to  bring  the 
general  spirit  of  it  into  greater  harmony  with  the 
instinctive  demands  of  a  healthy  human  nature. 

In  this  book  the  most  of  these  articles  are  repub- 
lished,  with  varying  amounts  of  revision,  and  the  dis- 
cussion is  extended,  and  made  to  include,  among  other 
points,  a  study  of  the  nature  of  production  and  distri- 
bution. The  one  process  is  found  to  consist  of  a  syn- 
thesis, and  the  other  of  an  analysis ;  the  same  elements 
which  are  combined  in  production  are  separated,  step 
by  step,  in  distribution.  The  process  loosely  termed 
competition  is  analyzed,  and  a  new  theory  of  "non- 
competing  groups"  is  advanced,  and  applied  to  the 
labor  problem.  The  lines  furnished  by  these  groups 
are  found  to  determine  the  limits  of  the  combinations 
of  capital  and  of  labor,  which  are  the  distinctive 
feature  of  the  present  era.  A  study  is  made  of 
the  laws  determining  what  forms  of  industrial  organi- 
zation shall  emerge  from  the  present  chaotic  condi- 


PREFACE.  V 

tion.  The  test  of  economic  principles  is  applied  to 
the  intellectual  and  spiritual  activities  of  society. 

There  are  two  or  three  points  in  the  system,  as  here 
outlined,  which  readers  of  recent  economic  literature 
might  naturally  suppose  were  directly  borrowed  from 
that  source.  These  were,  however,  contained  in  the 
articles  already  referred  to,  which  were  published  early 
enough  to  preclude  dependence  on  anything  very  re- 
cently issued.  Whatever  may  be  their  merits  or  de- 
merits, the  theories  here  advanced  are  not  borrowed 
from  the  writings  of  other  persons. 

If  this  book  were  intended  as  a  general  treatise  on 
political  economy,  it  would,  of  course,  be  very  incom- 
plete. It  omits  whatever  belongs  to  that  field  which  is 
common  to  economics  and  practical  politics.  It  has 
nothing  to  say  about  protection  or  currency.  Ob- 
viously the  work  cannot  be  a  text-book,  in  the  ordinary 
sense  of  the  term.  Teachers  who  do  not  want  a  text- 
book as  the  sole  or  chief  means  of  instruction,  and  who 
prefer  to  present  in  their  own  way  the  controverted 
practical  questions  of  the  day,  may,  perhaps,  find  a 
place  for  it  in  the  classroom.  The  place  which 
it  primarily  seeks  is  in  the  hands  of  readers  and 
thinkers  who  have  long  been  in  revolt  against  the 
general  spirit  of  the  old  political  economy. 

J.  B.  CLAKK. 


PREFACE   TO  THE  SECOND   EDITION. 


I  COMPLY  with  the  suggestion  of  a  friendly  critic  in 
stating  the  relation  which  the  theory  of  value  advanced 
in  the  fifth  chapter  of  this  book  bears  to  that  of  Profes- 
sor Jevons.  My  theory  was  attained  independently, 
very  long  ago,  but  proved  to  coincide  with  that  of  Pro- 
fessor Jevons  iii  the  general  fact  of  establishing  a  close 
connection  between  utility  and  value  in  exchange,  and 
in  regarding  utility  as  subject  to  mental  measurements. 
In  some  more  specific  points  it  resembled  that  theory 
without  quite  coinciding  with  it.  It  has  been  published 
without  change  in  any  of  these  respects.  Features  of 
the  theory  which  I  still  venture  to  regard  as  my  own 
are  the  identification  of  value  in  all  its  forms  with  meas- 
ure of  utility,  the  distinction  between  absolute  and 
effective  utility,  and  the  analysis  of  the  part  played  by 
society  as  an  organic  whole  in  the  valuing  processes  of 
the  market. 

Of  the  twelve  chapters  of  the  book,  nine  treat  of 
topics  falling  within  the  traditional  limits  of  economic 
science ;  while  the  remaining  three  discuss  subjects 
which  a  highly  orthodox  view  may  perhaps  regard  as 
lying  outside  of  economic  limits.  If,  however,  political 


Viii  PREFACE. 

economy  undertakes  to  discuss  wealth  in  all  its  forms, 
and  to  analyze  the  forces  which  actually  influence  the 
distribution  of  it,  it  is  difficult  to  see  how  these  topics 
can  be  excluded  from  the  discussion.  Those  who  be- 
lieve in  a  progressive  system  of  economic  science  will 
probably  not  desire  to  exclude  them. 

J.  B.  CLAKK. 

NORTHAMPTON,  MASS., 
FEB.  2,  1887. 


CONTENTS. 


CHAPTER  I. 
WEALTH  .  


The  current  conception  defective.  Light  derived  from 
the  Saxon  use  of  terms.  Essential  attributes  of  wealth. 
Insubstantial  commodities  included  in  the  definition ; 
personal  attributes  excluded.  The  nature  of  service; 
wealth,  the  material  element  involved  in  it. 

CHAPTER  II. 
LABOR  AND  ITS  RELATION  TO  WEALTH       ....       10 

Labor  and  service.  The  economic  nature  of  the  effort  of 
appropriation.  Officers  of  the  law  producers;  also 
writers,  speakers,  musicians,  etc.  Mental  and  moral 
elements  in  all  labor.  Labor  not  literally  the  creator 
of  every  commodity.  Four  varieties  of  utility,  result- 
ing from  four  corresponding  kinds  of  labor. 

CHAPTER  III. 
THE  BASIS  OF  ECONOMIC  LAW 32 

Human  volition  the  ultimate  cause  of  economic  phenom- 
ena. Need  of  a  correct  conception  of  the  nature  of 
man.  The  conception  current  among  economists  of 
the  past,  first,  unverified ;  and  secondly,  incorrect.  De- 
ductive methods  useful,  provided  the  premises  are  cor- 


X  CONTENTS. 

PACK 

rected.  Man  a  part  of  a  social  organism.  Classifica- 
tion of  societies.  Relations  between  the  society  and 
the  individual.  Effects  of  the  social  relation  on  indi- 
vidual natures.  The  expansiveness  of  higher  wants. 
The  highest  wants  unselfish ;  their  effects  in  the  mar- 
ket. Desire  for  personal  esteem  the  counterfeit  and 
assistant  of  the  highest  human  motives ;  its  economic 
effects.  Wants  as  active  or  quiescent;  their  normal 
condition.  Misuse  of  the  term  productive  consump- 
tion. 

CHAPTER  IV. 
THE  ELEMENTS  OF  SOCIAL  SERVICE 56 

Men,  altruistic ;  society,  egoistic.  Production  and  con- 
sumption the  reverse  of  each  other.  Consumption  not 
destruction,  but  utilization ;  maximum  utilization  the 
social  goal.  Secondary  consumption.  Social  produc- 
tion as  including  exchange,  and  involving  distribution. 
The  nature  of  sub-products.  Exchange  and  distribu- 
tion, practically  merged,  logically  distinct ;  the  one  a 
qualitative  diffusion  of  wealth  ;  the  other  a  quantitative 
one.  Bargain-making  not  a  part  of  the  act  of  ex- 
change, but  the  determining  element  in  distribution. 
The  competitive  process  analyzed.  True  competition 
diminishing ;  the  surviving  element  a  source  of  danger. 

CHAPTER  V. 
£HE  THEORY  OF  VALUE 70 

Need  of  a  definition  of  value  in  the  generic.  Utility  in- 
cluded in  the  popular  meaning  of  the  term.  The  idea 


CONTENTS.  XI 

PAGE 

of  value  a  secondary  abstraction.  Value  defined  as 
Measure  of  Utility.  Price  a  mode  of  expressing  the 
measurement.  Apparent  difficulties  of  the  definition 
removed  by  distinguishing  between  absolute  and  effec- 
tive utility.  Method  of  measuring  effective  utility. 
Society  the  measurer,  when  exchange  value  is  deter- 
mined. Society  the  purchaser  of  the  products  of  in- 
dividuals. The  absolute  standard  of  value. 


CHAPTER  VI. 
THE  LAW  OF  DEMAND  AND  SUPPLY 91 

Utilities,  not  matter,  the  subjects  of  exchange  and  distri- 
bution. Wants  gratified  in  the  order  of  their  inten- 
sity. The  purchase  limit ;  its  variations  due  to  changes 
in  prices,  and  in  the  relative  intensity  of  different 
wants.  The  simple  adjustment  of  demand  and  supply, 
in  the  case,  first,  of  inexpansive  wants,  and  secondly, 
of  expansive  ones.  The  tendency  of  increasing  produc- 
tion to  take  a  qualitative  direction.  General  overpro- 
duction of  qualitative  increments  impossible.  Fashion 
as  an  economic  force.  Normal  price  ;  this  not  station- 
ary. Elementary  utilities  increasingly  costly;  form 
and  place  utilities  increasingly  cheap.  The  predomi- 
nance of  the  utilities  which  tend  to  cheapness.  Influ- 
ences which  render  industry  as  a  whole  increasingly 
productive.  True  and  false  Malthusianism.  Inaccu- 
racies in  the  orthodox  theory  of  demand  and  supply; 
an  important  class  of  commodities  omitted.  The 
need  of  basing  the  law  on  utilities  rather  than  on 
commodities. 


Xll  CONTENTS. 

PAGE 

CHAPTER   VII. 
THE  LAW  OF  DISTRIBUTION 107 

The  mode  of  dividing  the  product  of  industry  changing. 
The  moral  element  in  the  wage  question.  The  effect 
of  the  consolidation  of  capital  and  of  labor.  Vague- 
ness of  the  ordinary  conception  of  demand  and  supply ; 
their  systematic  action ;  their  primary,  secondary  and 
ternary  fields.  Tabular  representation  of  the  synthe- 
sis of  elements  resulting  in  a  single  completed  product. 
Distribution  as  the  reversal  of  this  synthesis ;  the  divis- 
ion purely  quantitative.  The  sale  of  a  completed 
product  a  primary  division  of  social  wealth ;  that  of  a 
sub-product  secondary ;  that  of  a  share  of  a  sub-product 
ternary;  the  last  the  criterion  of  wages.  Tabular  rep- 
resentation of  the  principle  of  non-competing  groups. 
The  groups,  as  such,  agents  in  distribution.  Examina- 
tion of  the  theory  that  the  exchange  of  surpluses  de- 
termines prices.  Three  gradations  of  competitive  ac- 
tion ;  abnormal  competition  the  cause  of  combinations. 
Contrast  between  past  and  present  conditions. 

CHAPTER  VIII. 
WAGES  AS  AFFECTED  BY  COMBINATIONS      ....    126 

Products  the  source  of  wages.  Statement  of  the  Wage- 
Fund  doctrine.  Errors  refuted  by  applying  the  prin- 
ciple that  distribution  deals  with  pure  quantity. 
Wages,  as  a  value,  taken  from  the  value  created  by  in- 
dustry, but  subsequently  embodied  in  usable  forms  by 
a  process  of  exchange.  Capital  essential  to  this  ex- 
change. Wages  of  a  working  group  taken  from  a 
specific  sub-product,  and  gauged  in  amount,  first  by 


CONTENTS.  xiil 

PAGE 

the  amount  of  the  sub-product,  and  secondly,  by  the 
terms  of  the  division  made  with  the  employer.  Vari- 
ations historically  shown  to  be  due  to  changes  in  both 
determining  causes.  Difference  in  principle  between 
the  present  and  the  former  mode  of  dividing  products ; 
organization  the  cause  of  it.  Labor  unions  a  resource 
against  an  unjust  division.  Disappearance  of  individ- 
ual competition.  Necessity  for  appealing  to  moral 
force  in  dividing  products.  Conditions  which  deter- 
mine whether  labor  unions  shall  or  shall  not  follow  the 
lines  of  occupation.  The  boycott  as  an  instrument  of 
coercion.  Recent  consolidations  of  capital ;  their 
primary  and  secondary  objects,  and  their  effects  on  real 
wages.  Increased  need  of  moral  agencies. 

CHAPTER  IX. 
THE  ETHICS  OF  TRADE 149 

Gloomy  outlook  afforded  by  Ricardianism ;  the  scientific 
weakness  of  the  system.  Moral  force  the  characteris- 
tic of  the  new  regime ;  this  new  only  in  its  mode  of 
action.  Its  origin  as  a  social  force,  and  its  gradual 
extension.  Effects  of  the  institution  of  property. 
Different  codes  prevalent  in  the  village  and  the  mark 
of  mediaeval  times ;  modern  society  a  fusion  of  the  two 
local  elements,  and  morally  dualistic.  Competition 
formerly  repressed  by  moral  sentiment ;  opportunities 
for  this  agency  in  the  modern  market.  Disastrous  ef- 
fects of  abandoning  the  standard  of  just  bargains. 
Wealth  legitimately  acquired  by  production ;  acquisi- 
tion by  unequal  exchanges  a  prevalent  abuse ;  oppor- 
tunities for  repressing  it  afforded  by  present  condi- 
tions; effect  of  this  upon  wages.  Competition,  in  its 
surviving  fields,  tending  to  become  truly  free. 


XIV  CONTENTS. 

FACE 

CHAPTER  X. 
THE  PRINCIPLE  OF  COOPERATION 174 

Cooperation  an  old  principle  in  a  new  form.  Economic 
science  formulated  by  Adam  Smith  in  an  era  of  ex- 
treme individualism ;  present  tendency  to  merge  the 
individual  in  the  organization.  Cooperation  a  prin- 
ciple of  organic,  not  personal  independence.  Just  dis- 
tribution its  aim.  Arbitration  an  appeal  to  justice 
involving  constant  recourse  to  tribunals ;  this  hostile 
to  harmonious  effort.  Tendency  of  cooperation  to  in- 
crease production  and  harmonize  distribution.  Small 
limits  of  possible  increase  of  wages  by  methods  of  con- 
tention. Interests  of  capital  and  labor  identical  in 
production,  antagonistic  in  distribution.  Tendency 
of  the  wage  system  to  create  a  conflict,  but  to  set  lim- 
its to  overt  action.  Education  a  means  of  narrowing 
these  limits,  not  of  abolishing  all  conflict ;  this  latter 
possible  by  cooperation.  Effects  of  profit-sharing  ;  its 
practicability.  Four  systems  of  dividing  products 
now  in  use ;  the  principle  which  insures  the  survival 
of  the  fittest  in  each  particular  field.  Difficulties  of 
new  experiments  in  full  cooperation ;  the  ultimate  sur- 
vival of  this  form  to  be  determined  by  its  effects  in 
successful  instances.  The  easiest  form  of  cooperation 
likely  to  have  the  greatest  immediate  extension ;  the 
best  form  to  have  the  longest  continuance.  Rochdale 
stores  and  communal  farms ;  their  minor  influence  on 
the  wages  question;  their  educational  value.  Muni- 
cipal enterprises ;  prison  and  work-house  industries. 
Effect  on  general  wages  of  instances  of  successful 
cooperation.  The  permanence  of  the  principle  assured. 


CONTENTS.  XV 

PAGE 

The  socialistic  state ;  its  principle  despotic.    Freedom 
the  basis  of  cooperation. 

CHAPTER  XL 

NON-COMPETITIVE    ECONOMICS 203 

Competition  no  longer  general.  Rational  wealth  the 
economic  end  of  social  action ;  an  approximation  to 
this  end  formerly  afforded  by  competition  ;  the  survi- 
val of  the  principle  in  residual  fields  due  to  a  similar 
action;  the  principle  abandoned  where  it  ceases  thus 
to  act.  The  highest  forms  of  rational  wealth  disbursed 
non-competitively.  Art  products  placed  at  the  service 
of  the  public ;  also  means  of  intellectual  and  spiritual 
education.  This  disbursal  of  products  of  no  effect  on 
the  relation  of  capital  to  labor.  The  principle  of  in- 
appropriable  utilities ;  its  special  application  to  the 
railway  problem. 

CHAPTER  XII. 
THE  ECONOMIC  FUNCTION  OF  THE  CHURCH       .        .        .      221 

Material  commodities  which  minister  to  spiritual  wants ; 
special  modes  of  disbursing  them.  Relations  of  rich 
and  poor  in  this  respect.  Spiritual  poor-relief;  the 
principle  involved  not  one  of  charity.  This  function 
committed  to  the  church,  and  fulfilled  with  some  fidel- 
ity. The  commodities  to  be  disbursed  purchased  in 
the  open  market ;  the  necessity  for  a  revenue,  and  for 
securing  it  in  a  non-mercantile  way.  The  prevalence 
of  semi-mercantile  methods.  The  appeal  to  the  spirit 
of  caste.  Reformation  needed  in  the  outward  forms 
of  church  activity. 


CHAPTER   I. 

WEALTH. 

PRACTICAL  wisdom  was  never  more  in  demand  than 
at  present.  Questions  concerning  currency,  free-trade, 
transportation,  etc.,  are  demanding  and  receiving  the 
attention  of  political  economists,  and  it  is  in  this  part 
of  their  science  that  the  attractive  fields  lie  both  for  the 
writer  and  the  reader.  The  period  of  irreconcilable 
diversity  in  the  fundamental  principles  of  the  science 
seems  to  be  past,  and  one  of  relative  unanimity,  in 
thought  if  not  in  language,  appears  to  have  arrived. 
May  theoretical  work,  then,  be  laid  definitely  aside  ? 
Not  unless  fundamental  truths  are  of  less  importance 
here  than  in  other  departments  of  human  thinking,  and 
not  unless  the  unanimity  concerning  them  is  something 
more  than  relative.  If  obscurity  still  hangs  over  prin- 
ciples, the  clear  apprehension  of  which  is  essential  to  all 
reasoning  on  the  subject,  the  removal  of  it,  besides  hav- 
ing an  incalculable  value  in  itself,  will  afford  a  wel- 
come supplement  to  directly  practical  work.  It  will 
shed  light  on  the  pressing  social  questions  of  the  day. 
In  the  present  state  of  the  public  mind,  for  example, 
financial  heresies  and  strange  teachings  concerning  the 


2  WEALTH. 

rights  of  property  find  a  ready  circulation  ;  and,  if  these 
false  doctrines  connect  themselves,  even  remotely,  with 
fundamental  errors  of  political  economy,  then  the  assault 
upon  the  practical  fallacies  can  never  be  quite  success- 
ful until  the  underlying  errors  be  exposed  and  cor- 
rected. Questions  on  the  solution  of  which  the  general 
prosperity  depends  cannot  be  solved  without  the  clear 
apprehension  of  correct  principles. 

Nothing  can  be  more  fundamental  in  economic 
science  than  the  conception  of  wealth.  Is  it  worth  our 
while  to  take  issue  with  the  current  definitions  of  it? 
Not  if  the  question  to  be  settled  is  one  of  terms  merely, 
and  if  the  underlying  thought  is  clear.  Exactly  the 
reverse  of  this  is  true  of  the  definition  of  wealth  which 
John  Stuart  Mill  has  inherited  from  Adam  Smith,  and, 
in  turn,  bequeathed  to  the  so-called  orthodox  school  of 
political  economy.  The  terms  of  this  definition  are  not 
seriously  objectionable,  but  the  thought  which,  in  the 
discussion,  they  have  been  made  to  convey  is  so  incon- 
sistent with  the  significance  of  the  terms  themselves  as 
to  carry  confusion  throughout  the  science. 

Mr.  Mill's  conception  of  wealth  is  so  limited  as  to 
exclude  much  that  is  obviously  a  proper  subject  of 
economic  study.  It  has  obliged  him  to  revive  the  per- 
nicious classification  of  labor  as  productive  and  unpro- 
ductive, and  expressly  to  exclude  from  the  list  of  pro- 
ductive laborers  such  persons  as  "  the  actor,  the  musical 
performer,  the  public  declaimer  or  reciter,  and  the 


WEALTH.  3 

showman " ;  also  "  the  army  and  navy,  the  legislator, 
the  judge,  and  the  officer  of  justice."  On  the  other 
hand,  certain  economists  under  the  leadership  of  M. 

• 

Bastiat,  impressed  by  the  evils  resulting  from  the 
traditional  classification,  have  found  no  other  remedy 
than  that  of  abandoning  the  conception,  wealth,  as 
the  subject  of  their  science. 

Yet  there  is  a  certain  definable  thing  which  is  and 
must  be  the  subject  of  political  economy.  Whether 
avowed  or  not,  a  definite  conception  is,  in  reality,  under 
discussion  in  every  treatise  on  this  science.  For  this 
conception  the  term  wealth,  if  used  in  the  strictest  ac- 
cordance with  history  and  etymology,  is  an  accurate 
designation.  The  Saxon  weal  indicated  a  condition  of 
relative  well-being,  the  state  of  having  one's  wants  well 
supplied  as  compared  with  a  prevailing  standard.  No 
possession  common  to  all  men  can  constitute  such  rela- 
tive well-being.  The  limitless  gifts  of  nature  do  not 
produce  it,  since  they  are  indiscriminating  in  their  min- 
istrations; air  and  sunlight  make  no  differences  among 
men,  and,  though  creating  absolute  well-being,  cannot 
create  that  social  condition  indicated  by  the  term 
wealth.  This  relative  condition  can  be  produced  only 
by  that  which,  besides  satisfying  wants,  is  capable  of 
appropriation. 

It  is  by  a  transfer  of  meaning  that  the  term  which 
primarily  designated  a  condition  of  life  has  been  applied 
to  the  things  which  produce  the  condition.  But  not 


4  WEALTH. 

all  causes  of  comparative  happiness  are  included  in  the 
meaning  of  the  word.  Wealth,  as  historically  used, 
signified  the  well-being  resulting  from  outward  rather 
than  inward  causes.  Health  and  contentment  may 
make  the  shepherd  happier  than  the  owner  of  flocks ; 
yet  the  owner  only  is  "  well  off."  Reserving  a  broader 
term  to  designate  well-being  in  general,  usage  has  em- 
ployed the  word  wealth  to  signify,  first,  the  compar- 
ative welfare  resulting  from  material  possessions,  and 
secondly,  and  by  a  transfer,  the  possessions  them- 
selves. 

Wealth  then  consists  in  the  relative-weal-constituting 
elements  in  man's  material  environment.  It  is  objective 
to  the  user,  material,  useful,  and  appropriable.  Let  us 
apply  the  term  with  logical  consistency  to  whatever 
possesses  these  four  essential  attributes,  and  note  the 
effect  on  the  traditional  conception  of  wealth.  Mr. 
Mill  and  the  orthodox  school  will  be  found  to  exclude 
from  their  classification  things  which  possess  these  at- 
tributes, and  to  include  some  which  do  not.  They 
recognize  as  wealth  only  those  things  which  are  suffi- 
ciently substantial  and  durable  to  constitute  a  more  or 
less  permanent  possession,  things  which  would  appear 
on  the  inventory,  if  society  were  suddenly  to  cease  pro- 
ducing and  consuming,  and  apply  itself,  for,  say,  a 
month  or  two,  to  taking  an  account  of  stock.  It  is  here 
maintained  that  durability  is  not  an  essential  attribute 
of  wealth.  Durability  is  a  factor  of  value^  and  deter- 


WEALTH.  5 

mines,  in  so  far,  the  measure  of  wealth  in  any  particular 
product.  But  products  are  of  all  degrees  of  durability, 
and  there  is  no  ground  for  excluding  any  of  them  from 
the  conception  of  wealth  on  the  ground  of  this  simple 
difference  of  degree.  Even  the  school  of  writers  re- 
ferred to  would  not  hesitate  to  class  the  ices  of  the  con- 
fectioner in  the  same  category  with  the  stone  wall  of 
the  mason,  though  they  are  at  opposite  extremes  in  the 
scale  of  durability.  They  would,  however,  exclude 
music  from  the  conception,  on  the  ground  of  its  insub- 
stantial and  perishable  character.  It  is  maintained  in 
this  discussion  that,  in  that  which  constitutes  wealth, 
there  is  no  difference  other  than  one  of  degree  between 
music  and  a  stone  wall.  The  difference  in  their  dura- 
bility is,  indeed,  one  of  the  factors  in  their  relative 
value  ;  but  both  alike  possess  the  four  essential  attri- 
butes above  specified ;  they  are  objective  and  material 
products;  they  are  useful  and  appropriable,  and  fall 
within  the  definition  of  wealth. 

Having  unduly  limited  their  conception  of  wealth  in 
one  direction,  the  orthodox  writers  have  unduly  ex- 
tended it  in  another.  They  have,  for  example,  classed 
as  wealth  the  acquired  skill  and  the  technical  knowl- 
edge of  the  laborer.  Personal  attainments,  as  subjec- 
tive and  immaterial,  are  excluded  from  the  meaning  of 
the  term.  They  are  not  a  possession ;  that  implies  ex- 
ternality to  the  possessor.  They  are  what  he  is,  not 
what  he  has.  Popular  thought  and  speech  broadly  dis- 


6  WEALTH. 

tinguish  the  able  man  from  the  wealthy  man.  A  man 
has  a  potential  fortune,  not  an  actual  one,  in  his  abili- 
ties. The  term  indicates  a  state  of  being  able,  and 
implies  a  possibility ;  not  an  attained  result.  Labor 
creates  wealth,  and  acquired  abilities  are  potential 
labor.  They  are  to  be  regarded  as  the  potentiality  of 
the  human  factor  of  production,  and  it  introduces  an 
element  of  confusion  into  the  science  to  class  them  with 
the  completed  product.  If  these  considerations  were 
not  sufficient  to  settle  the  economic  status  of  a  man's 
subjective  qualities,  it  would,  at  least,  suffice  for  that 
end  to  apply  to  them  the  test  of  the  traditional  defini- 
tion itself,  in  which  "exchangeable  value"  is  made  to 
be  the  essential  attribute  of  wealth.  In  every  exchange 
two  commodities  are  alienated,  and  transferred  to  new 
ownership.  Nothing  can  be  subjected  to  this  process 
which  is  an  inseparable  part  of  one  man's  being. 

The  error  of  putting  abilities  and  products  in  the 
same  category  is  wide-spread,  and  appears  in  the  writ- 
ings of  some  of  Mr.  Mill's  opponents.  As  acute  a  thinker 
as  J.  B.  Say  characterizes  acquired  talents  as  "a  species 
of  wealth,  notwithstanding  its  immateriality,  so  little  im- 
aginary that,  in  the  shape  of  professional  services,  it  is 
daily  exchanged  for  gold  and  silver."  The  illustration 
is  its  own  best  answer.  The  talents  are  not  alienated, 
and  cannot  be  so  ;  the  lawyer  does  not  deprive  himself 
of  them,  nor  does  his  client  acquire  them,  by  the  ren- 
dering of  legal  service.  Their  product  only  is  trans- 


WEALTH.  7 

ferable,  and  that  only  is  a  commodity.  It  will  hereafter 
be  shown  that  the  human  effort  which  creates  a  product 
calls  into  exercise  activities  physical,  mental  and  moral. 
If  wealth-creating  abilities  are  to  be  confounded  with 
the  product  which  results  from  exercising  them,  every 
power  acquired  by  effort,  involving,  in  practice,  the 
whole  man,  will  have  to  be  classed  as  a  commodity. 
The  error  is  mentally  confusing,  and  it  is  disastrous  in 
its  practical  results.  Man  produces  wealth  and  con- 
sumes it;  but  man  himself  is  always  distinct  from  it. 

The  illustration  just  cited  suggests  an  examination  of 
the  "  service "  theory  of  M.  Bastiat.  As  alchemists, 
searching  unsuccessfully  for  gold,  discovered  com- 
pounds from  which  oxygen  might  be  extracted,  so 
those  who  have  sought  for  a  substitute  for  wealth,  as  a 
fundamental  conception  of  economic  science,  have  at- 
tained a  compound  notion  the  analysis  of  which  gives 
something  which  is  to  the  economic  theory  what  oxygen 
is  to  the  chemical. 

According  to  M.  Bastiat  it  is  services  only  that  are 
exchanged  in  the  market ;  commodities,  indeed,  pass 
from  hand  to  hand ;  but  they  are  services  materialized, 
while  others  remain  without  material  embodiment. 
"  Do  this  for  me,  and  I  will  do  that  for  you,"  is  the  for- 
mula for  the  exchange  of  services  in  their  immaterial 
state  ;  "give  me  what  you  have  done,  and  I  will  give 
you  what  I  have  done  "  is  the  formula  for  the  exchange 
of  commodities. 


8  WEALTH. 

Now  a  service  consists  of  an  effort  and  a  gratifica- 
tion. In  order  that  it  may  exist,  some  one  must  labor, 
and  some  one's  want  must  be  satisfied.  It  is  apparent 
that  effort,  as  such,  gratifies  no  one.  An  artisan's 
effort  gives  pleasure  only  through  the  medium  of  the 
commodity  which  he  produces.  The  efforts  of  a  body- 
servant  give  satisfaction  only  through  the  modifications 
which  they  effect  in  the  master's  environment;  and 
apart  from  this  they  would  certainly  not  be  wanted. 
Effort  is  irksome  to  the  laborer,  and,  by  the  law  of  sym- 
pathy, it  is  irksome  to  those  who  witness  it ;  without 
outward  results,  it  would  be  intolerable  to  an  em- 
ployer. A  musician's  effort  is  displeasing  in  itself, 
though  the  annoyance  which  the  display  of  it  occa- 
sions is  counterbalanced,  and  a  large  balance  of 
enjoyment  is  secured,  by  the  objective  effect,  —  musi- 
cal sound.  This  principle  may  be  easily  tested.  Let  an 
accomplished  pianist  advertise  a  concert  on  one  of  Mr. 
Petersilea's  mute  piano-fortes,  and  promise  to  display 
a  large  amount  of  effort ;  how  many  tickets,  at  a  dollar 
each,  would  he  probably  sell?  Let  a  voiceless  speaker 
attempt  to  entertain  an  audience  by  a  similar  display  of 
effort ;  how  long  would  the  assembly  remain  together  ? 
Yet,  in  either  case,  absolutely  nothing  would  be  want- 
ing but  the  tenuous  outward  product,  —  sound. 

The  objective  element  inseparable  from  service  is 
wealth;  the  totality  of  it  is  the  sum  total  of  social 
products.  This  material  element  is  the  result  of  effort 


WEALTH. 

and  the  cause  of  gratification,  and  furnishes,  therefore, 
the  necessary  connection  between  the  elements  of  ser- 
vice. It  has  invariably  the  four  essential  attributes  of 
wealth ;  it  is  objective  to  the  producer  and  the  utilizer ; 
it  is  material,  useful  and  appropriable.  It  is  distin- 
guishable in  every  action  that  can  be  termed  a  service ; 
but  it  is  not  always  tangible,  visible  and  durable.  It 
is  a  mark  of  progressing  civilization  when  the  products 
of  labor,  the  objective  elements  in  service,  take  as  their 
basis  the  more  tenuous  materials  given  in  nature.  It 
marks  a  certain  supremacy  over  natural  forces  when 
man  hews  stone  and  fashions  timber ;  it  marks  an  intel- 
lectual sovereignty  when  the  thought  of  man  impresses 
itself  on  vibrating  air  or  makes  electricity  its  messenger 
to  remote  regions.  It  is  the  more  ethereal  products  of 
human  effort  that  are  the  characteristic  wealth  of  a 
highly  organized  society. 


CHAPTER   II. 

LABOR    AND   ITS   RELATION    TO    WEALTH. 

LABOR  is  the  former  of  the  two  subjective  elements 
in  service,  namely,  the  wealth-creating  effort.  It  is 
the  making  nature  subservient  to  a  master,  and  the 
primitive  mode  of  doing  this  is  by  simply  determining 
what  master  an  already  useful  element  shall  serve. 

Relative  weal  results  from  the  mere  appropriation  of 
limited  natural  gifts.  With  the  unlimited  gifts  monop- 
oly is  impossible ;  the  ultra-democracy  of  air  and  sun- 
light insist  on  creating,  in  so  far  as  their  ministrations 
can  do  it,  a  weal  that  is  equal  and  universal.  But  prim- 
itive man  may  pluck  the  wild  fruit  or  slay  the  game  in 
his  natural  Eden,  and  then  vindicate  by  effort  his 
right  to  enjoy  them.  He  may  select  a  dwelling-place, 
proclaim  it  his  own,  and  repel  intruders ;  he  may  guard 
the  fruit-yielding  tree,  and  even  the  hunting  ground 
itself.  This  is  almost  the  only  form  of  labor  which 
exists  in  the  most  primitive  social  state.  Man,  here, 
lives  by  the  mere  appropriation  of  the  spontaneous 
products  of  tropical  nature,  and  expends  his  chief 
efforts  in  guarding  his  property.  The  capacity  to  be 
thus  owned  and  utilized  is  a  primary  attribute  of 
wealth. 


LABOR   AND   ITS   RELATION   TO   WEALTH.  11 

The  condition  of  appropriation  is  a  relation  between 
commodities,  on  the  one  hand,  and  persons,  on  the 
other,  and  implies,  therefore,  that  both  the  commodity 
itself  and  the  society  where  it  exists  should  be  such 
that  the  relation  may  be  established.  The  commod- 
ity must  exist  in  limited  quantity,  and  must  be  of 
a  nature  capable  of  being  retained  in  the  possession 
of  a  particular  user.  The  atmosphere,  as  a  whole,  is  in- 
appropriable  from  its  unlimited  quantity ;  while  pleasing 
atmospheric  effects,  cloud  scenery,  showers  or  breezes 
are  limited  in  quantity,  but  are  inappropriable  from 
their  nature.  They  minister  transiently  to  whomso- 
ever they  will,  and,  in  the  long  run,  with  impartiality. 
Except  as  rain-drops  mingle  with  the  earth,  or  as 
breezes  and  sunset-colors  favor  the  dwellers  in  an  ele- 
vated locality,  and  thus  impart  a  value  to  the  land 
itself,  there  is  no  power  in  man  to  determine  the  direc- 
tion of  their  ministrations.  The  ownership  of  land 
carries  with  it  only  a  partial  control  of  the  benefits  of 
these  elusive  elements  in  nature.  Utilities  which  are, 
from  their  nature,  inappropriable  constitute  an  impor- 
tant and  neglected  subject  of  economic  study. 

On  the  part  of  the  society  where  the  commodity 
exists  something  is  also  requisite,  in  order  that  the  rela- 
tion of  ownership  may  subsist.  The  attributes  of 
society  which  render  ownership  possible  are,  it  is  be- 
lieved, usually  ignored  altogether  in  treatises  on  this 
subject.  The  existence  of  these  attributes  is  secured 


12  LABOR   AND   ITS    RELATION   TO   WEALTH. 

by  the  labor  of  a  distinct  class  of  persons,  whose  true 
economic  function  cannot  be  apprehended  without 
noticing  the  effect  of  their  labors  upon  society,  and 
thus,  indirectly,  upon  the  wealth  which  exists  in 
society. 

In  order  that  the  essential  attribute  of  wealth,  appro- 
priability,  may  be  realized,  the  rights  of  property 
must  be  recognized  and  enforced,  either  by  personal 
prowess,  or  by  the  agency  of  legal  functionaries.  In 
the  most  primitive  of  societies  the  guarding  of  property 
is  done  by  each  owner  for  himself,  and  constitutes,  as 
above  stated,  his  only  regular  labor.  The  earliest  gen- 
eral division  of  labor  consists  in  assigning  the  protec- 
tive function  to  men,  uniting  with  it  the  congenial  work 
of  hunting  wild  game,  and  reserving  the  more  onerous 
industrial  functions  for  women.  Civilization  partially 
reverses  this  arrangement ;  it  includes  the  majority  of 
men  in  the  industrial  ranks,  and  excludes  women  from 
the  heaviest  tasks ;  but  it  still  reserves  a  limited  class 
of  men  for  the  work  of  protecting  property.  Compar- 
atively few  officers  of  justice  render  property  so  se- 
cure that  whatever  a  man  produces  becomes  his  in 
the  act  of  production,  and  remains  in  his  possession, 
with  but  a  minimum  of  thought  and  effort  on  his  own 
part.  Useful  things  are  now  appropriable  in  so  far 
as  the  condition  of  society  is  concerned. 

In  the  securing  of  this  result  the  definition  of  rights 
is  as  important  as  their  enforcement,  and  legislators 


LABOR  AND   ITS   RELATION   TO   WEALTH.  13 

and  judges,  as  well  as  sheriffs,  are,  therefore,  instru- 
mental in  producing  that  social  condition  which  is 
necessary  in  order  that  the  attribute  of  wealth,  appro- 
priability,  may  be  realized.  Whoever  makes,  interprets, 
or  enforces  law  produces  wealth.  He  imparts  to  the 
commodities  of  the  society  which  employs  him  the 
essential  wealth-constituting  attribute  of  appropriabil- 
ity.  Commodities  may  exist  in  society,  and  may 
possess  any  degree  of  utility ;  they  may  even  be  appro- 
priable, as  far  as  they  are  themselves  concerned;  but 
if  social  causes  prevent  their  attaining  the  state  of 
appropriation,  they  lack,  in  fact,  the  attribute  of  ap- 
propriability,  and  are  not  actual  wealth.  The  produc- 
tion of  social  modifications  which  result  in  giving  to 
commodities  the  attribute  of  appropriability  is  the 
chief  economic  function  of  legislative  and  judicial 
labor.  It  is  as  truly  a  wealth-creating  function  as 
the  direct  production  of  useful  commodities. 

Concerning  this  important  class  of  laborers  much 
misconception  has  existed.  Mr.  Mill,  repeating  the 
error  of  Adam  Smith,  classes  them  as  unproductive. 
M.  Bastiat,  M.  Gamier  and  others  term  their  efforts 
"services,"  but  offer  no  satisfactory  substantive  con- 
ception of  anything  as  a  product  of  their  labor.  Mr.  J. 
B.  Say,  one  degree  nearer  to  the  truth,  classes  them 
as  producers,  on  the  ground  that  they  enable  the  in- 
dustrial classes  to  give  their  undivided  efforts  to  their 
own  occupation,  and  thus  contribute  indirectly  to  their 


14  LABOR  AND   ITS   RELATION   TO   WEALTH. 

products.  This  indirect  mode  of  proving  that  a  class 
of  laborers  is  productive,  though  plausible  and  fre- 
quently employed,  is  extremely  objectionable.  Every 
class  of  producers  contributes  in  this  manner  to  the 
products  of  every  other.  The  shoemaker  contributes 
indirectly  to  the  productions  of  the  farmer,  by  saving 
him  the  necessity  of  turning  aside  from  his  labor  to 
mend  shoes ;  yet  he  considers  that  the  shoes,  and  not 
a  share  in  the  farmer's  harvest,  are  the  direct  product 
of  his  labor.  In  like  manner  the  farmer  contributes 
indirectly  to  the  productions  of  the  shoemaker,  by 
saving  him  the  necessity  of  turning  aside  from  his  oc- 
cupation to  cultivate  the  ground;  yet  the  farmer  re- 
gards his  grain,  and  not  a  share  in  the  shoes,  as  the 
product  of  his  labor.  A  direct  product  must  be  ex- 
changed if  any  class  of  producers  is  to  share  in  the 
wealth  created  by  another,  and  every  class  must  have 
a  direct  product  if  they  are  to  be  classed  as  produc- 
tive laborers.  The  direct  product  which  legal  officers 
offer  in  return  for  their  support  consists  in  the  attri- 
bute of  appropriability  which  they  impart  to  commod- 
ities. They  put,  as  it  were,  the  finishing  touch  to 
the  products  of  society,  which  finishing  touch  renders 
them  marketable  wealth ;  and  this  modification,  which 
constitutes  a  difference  between  potential  and  actual 
wealth,  is  that  which  they  exchange  for  their  subsis- 
tence. If  the  term  productive  were  to  be  taken  in  a 
narrow  sense,  as  meaning  productive,  not  of  wealth, 


LABOK   AND   ITS   RELATION   TO   WEALTH.  15 

but  of  specific  useful  commodities,  there  would  be 
ground  for  classing  these  laborers  as  unproductive ; 
and  this  is  the  origin  of  the  misapprehension  concern- 
ing them  that  has  existed  from  the  time  of  Adam 
Smith  to  the  present  day.  These  classes  are  protec- 
tive of  useful  commodities,  but  are  productive  of 
wealth. 

All  forms  of  labor  create  wealth;*  yet  for  every 
product  nature  furnishes  the  substance  and  man  only 
the  modes.  One  class  of  laborers  create,  as  has  been 
shown,  the  attribute  of  appropriability ;  the  other 
general  class  create  the  attribute  of  utility.  The  lat- 
ter is  invariably  accomplished  by  producing  modifica- 
tions in  natural  agents  objective  to  the  laborer.  In- 
dustrial labor  is  always  the  applying  of  a  human 
effort  to  a  natural  agent.  The  modification  produced 
enables  the  agent  to  satisfy  a  want  which  it  was 
previously  incapable  of  satisfying.  This  want-satis- 
fying power  imparted  by  labor  is  a  "  utility,"  and, 
if  the  attribute  of  appropriability  be  also  conferred, 
wealth  is  created.  A  natural  agent  possessing  utility 
and  appropriability  is  wealth,  and  this  only  is  so. 
The  natural  agent  need  not  be  of  a  substantial  or 
permanent  character ;  any  substance,  force  or  activity 
whatsoever  in  physical  nature,  which  receives  a  want- 
satisfying  power  by  means  of  a  laborer's  efforts, 
appropriability  being  presupposed,  becomes  wealth ; 
and,  though  its  duration  be  but  momentary,  and  its 
*  Particular  cases  of  wasttd  effort  are  not  here  considered. 


16  LABOR   AND    ITS   RELATION   TO   WEALTH. 

character  insubstantial  or  intangible,  there  is  no 
ground  for  excluding  it  from  the  category  so  long  as 
its  brief  utility  continues. 

Dr.  Roscher  has  called  attention  to  the  intrinsic 
absurdity  of  calling  a  violin  manufacturer  a  produc- 
tive laborer,  and  the  artist  who  plays  the  violin  an 
unproductive  one,  as  is  expressly  done  by  Mr.  Mill 
and  his  followers.  The  violin  would,  thus,  be  classed 
as  wealth ;  the  music,  the  sole  end  of  its  manufacture, 
not  wealth.  The  product,  music,  satisfies  a  direct 
want,  the  violin  only  an  indirect  one ;  the  latter  is 
an  instrument  for  producing  that  which  satisfies  direct 
desire.  The  direct  want-satisfying  product  is,  if  any- 
thing, more  obviously  wealth  than  the  indirect  one. 
Relative  durability  and  tangibility  are  non-essential 
attributes.  The  mechanic  who  makes  the  violin  im- 
parts utility  to  wood ;  the  artist  who  plays  it  imparts 
utility  to  air  vibrations.  One  product  is  perceived 
by  the  senses  of  sight  and  touch,  the  other  by  the 
sense  of  hearing.  One  is  extremely  durable,  the 
other  extremely  perishable ;  but  both  alike  come  un- 
der our  definition.  In  both  a  natural  agent  has  re- 
ceived a  utility  through  human  effort;  both  products 
are  wealth,  and  both  laborers  productive. 

So  the  sculptor  imparts  utility  to  marble,  the  painter 
to  colors,  the  photographer  to  chemical  agencies  and 
solar  light.  The  designer  and  the  mechanical  draughts- 
man impart  a  high  utility  to  a  small  amount  of  plum- 


LABOR   AND   ITS    RELATION   TO   WEALTH.  17 

bago,  and  the  writer  to  a  small  amount  of  ink.  No 
utility  of  a  higher  order  is  conceivable  than  that 
which  the  writer  imparts  to  ink  and  paper,  and  the 
speaker  to  vibrating  air,  namely,  the  capacity  for 
conveying  intelligence.  A  bridge  across  a  stream 
renders  an  interchange  of  products  possible  between 
dwellers  on  opposite  banks.  Previously  each  side 
produced  for  itself;  after  the  building  of  the  bridge 
they  produce  partly  for  each  other,  and  to  the  great 
advantage  of  both.  Two  isolated  societies  become,  by 
virtue  of  the  interactivity  caused  by  the  bridge,  one 
organism.  Publications  are  mind-bridges ;  they  ren- 
der an  interchange  of  mental  products  possible,  as 
the  bridge  over  the  stream  does  of  material  prod- 
ucts. Mental  interactivities  take  place  by  means 
of  the  mind-bridge,  as  physical  ones  do  by  the  ordi- 
nary bridge.  Minds  are  united  in  organic  life  by  the 
one  means  of  communication,  as  bodily  activities  are 
by  the  other.  If  the  writings  of  an  author  are  a 
mind-bridge,  the  words  of  a  speaker  are  a  mind-ferry. 
As  the  ferry-boat  conveys  a  farmer's  produce  to  the 
market,  so  the  words  of  a  public  speaker,  floating  on 
air,  as  a  boat  on  water,  convey  his  intellectual  products 
to  the  place  where  they  find  their  market.  The 
mason  imparts  utility  to  the  stone  of  the  bridge,  and 
the  boat-builder  to  the  wood  of  the  boat;  the  writer 
imparts  a  higher  utility  to  ink,  and  the  speaker  to 
sound.  All  are  productive  laborers;  their  products, 


18  LABOR   AND  ITS   RELATION   TO   WEALTH. 

in  each  case,  are  utilities  imparted  to  natural  agents, 
and  fall  within  our  definition  of  wealth.  But  it  is 
the  intellectual  fashioners  of  tenuous  material  who 
are  social  workers  par  excellence,  since  the  diffusion 
of  thought  which  their  products  ensure  gives  intellec- 
tual life  to  the  social  organism. 

It  is  obvious  that,  in  literary  and  oratorical  prod- 
ucts, the  utility  imparted  by  the  human  effort  vastly 
transcends  the  natural  agent  which  is  its  substantial 
basis.  The  articulate  sounds  of  the  speaker  are  the 
ferry-boat;  the  ideas  are  the  cargo,  and  the  latter 
may  exceed  the  former  in  value  to  an  indefinite  ex- 
tent. In  this  case  boat  and  cargo  are  a  simultaneous 
product;  the  boat  is  fitted,  in  form,  to  every  different 
lading,  and  the  two,  as  an  industrial  product,  are  in- 
separable. This  illustration  affords  the  most  search- 
ing test  of  our  definition  of  wealth.  The  thought, 
as  existing  in  the  mind  of  the  speaker  previous  to 
its  utterance  in  words,  does  not  fall  within  the  con- 
ception. It  is  subjective  to  the  man,  and,  like  his 
mental  faculty  itself,  is  inalienable.  It  only  acquires 
the  attribute  of  transferability  when  it  attaches  itself 
to  the  agent,  —  the  vocal  sound.  This  apparently  trif- 
ling agent  transforms  it  from  a  simple  activity  into 
an  industrial  product.  Again,  with  the  consumers, 
the  audience,  the  thought  continues  to  exist,  or,  at 
least,  other  thought  induced  by  it  does  so ;  but,  after 
parting  with  its  material  vehicle,  the  sounds  that 


LABOR   AND   ITS   RELATION    TO    WEALTH.  19 

convey  it,  it  loses  the  attribute  of  transferability,  and 
becomes  again  a  simple  activity,  not  an  industrial 
product.  To  again  become  an  industrial  product,  it 
must  be  freighted  again  on  vocal  sounds.  Then  only 
can  it  be  transferred  from  hand  to  hand,  receive  its 
price  in  the  market,  and,  for  the  brief  period  of  its 
duration,  be  entitled  to  its  place  on  the  inventory  of 
social  wealth. 

As  the  widest  range  of  application  is  given  to  the 
term  natural  agent,  so  an  equally  broad  application 
must  be  given  to  the  term  labor.  The  human  activity 
which  produces  wealth  is  an  activity  of  the  entire  man, 
physical,  mental  and  moral,  and  there  is  no  industrial 
product  so  simple  and  so  purely  material  that  these 
three  elements  of  the  human  agency  are  not  repre- 
sented in  it.  In  proportion  as  the  intellectual  element 
in  the  labor  predominates  over  the  physical,  and  as  the 
moral  element  predominates  over  both,  the  product  rises 
in  the  scale  of  respectability  and  of  value.  The  labor 
of  a  stone-mason  involves  a  physical  effort  in  the  simple 
moving  of  materials,  an  intellectual  effort  in  their  skil- 
ful combination,  and  a  moral  effort  in  the  conscientious 
use  of  proper  materials  and  methods.  The  result  of 
the  physical  effort  is  seen  in  the  position  of  the  mate- 
rials that  have  been  moved  in  the  construction,  that  of 
the  intellectual  effort  in  their  strong  and  tasteful 
arrangement,  and  that  of  the  moral  effort  in  the  cer- 
tainty that,  in  ways  not  obvious  to  the  eye,  the  inter- 


20  LABOR   AND   ITS    RELATION   TO   WEALTH. 

ests  of  the  owner  have  been  consulted  by  the  builder, 
at  his  own  expense,  and  that  the  wall  is,  in  all  respects, 
as  strong  and  as  durable  as  it  seems.  In  literary,  profes- 
sional, and  educational  labor,  the  intellectual  element, 
of  course,  predominates  to  an  indefinite  extent  over  the 
physical,  and  the  moral  element  is  greatly  increased. 
The  latter  appears,  in  the  labor  of  the  writer,  in  his 
sincerity  of  purpose ;  in  that  of  the  lawyer  and  the  phy- 
sician, in  their  disinterestedness ;  and,  in  all  the  more 
intellectual  kinds  of  labor,  in  their  general  faithfulness 
and  conscientiousness.  Reliability  is  an  attribute  of 
the  product  in  each  case,  and  the  moral  factor  in  the 
labor  is  that  which  produces  it. 

The  debated  question  whether  moral  qualities  are 
paid  for  is  thus  simply  and  easily  decided.  The 
product  is  paid  for ;  reliability  is  an  attribute  of  the 
product  which  determines  its  value,  and  the  laborer 
who  can  produce  something  having  the  attribute  of 
reliability  can  secure  an  enhanced  price  for  it  in  the 
market.  All  labor  is  indirectly  paid  for;  its  com- 
pensation is  in  the  market  value  of  its  product, 
and,  in  so  far  as  moral  efforts  are  represented  in  an 
industrial  product,  they  are  paid  for  as  truly  as  other 
activities  of  the  laborer.  No  activities  of  man,  physical, 
mental,  or  moral,  are  paid  for  when  not  embodied  in  an 
industrial  product,  and  it  is  of  importance  to  remember 
that  labor,  as  such,  is  not  paid  for.  No  employer  takes 
pleasure  in  the  sweat  of  his  laborer's  brow ;  he  regrets 


LABOR   AND   ITS   RELATION   TO    WEALTH.  21 

it,  and  would  willingly  pay  the  same  compensation  to 
the  same  person  if  that  particular  product  could  be 
produced,  by  that  person  only,  without  effort.  The 
product  is  the  desired  object  in  each  case,  and  the 
labor,  apart  from  its  product,  is  not  paid  for  and  is 
never  a  commodity,  and  nothing  but  confusion  results 
from  so  viewing  and  treating  it.  The  statement  so 
frequently  met  with  in  works  on  Political  Economy 
that  "labor  is  a  commodity  and  is  governed  by  the 
same  laws  as  other  commodities "  is  one  of  the  mis- 
chievous errors  that  still  cling  to  the  science.  The  law 
of  wages,  the  subject  of  desperate  controversy,  is,  as  we 
shall  soon  see,  placed  in  a  new  and  clear  light  when 
one  apprehends,  in  its  full  bearing,  the  principle  that 
the  wage  of  labor  is  the  market  value  of  its  product. 

In  view  of  the  constant  presence  of  these  three  ele- 
ments in  labor,  the  physical,  the  mental,  and  the  moral, 
any  effort,  in  the  supposed  interest  of  the  working 
classes,  to  depreciate  mental  labor  in  comparison  with 
physical  is  unintelligent.  All  labor  is  mental.  To  a 
large  and  controlling  extent  the  mental  element  is 
present  in  the  simplest  operations.  With  the  laborer 
who  shovels  in  the  gravel  pit  the  directing  and  controll- 
ing influence  of  the  mind  predominates,  to  an  indefi- 
nite extent,  over  the  simple  foot-pounds  of  mechanical 
force  which  he  exerts.  The  latter  could  be  better  fur- 
nished by  an  ox.  It  would  take  certainly  three  stout 
men  to  exert  as  many  foot-pounds  of  force  as  a  single 


22  LABOR   AND   ITS   RELATION   TO   WEALTH. 

ox,  and  if  such  a  laborer  is  able  to  secure  larger  wages 
than  the  third  part  of  the  cost  of  the  labor  of  an  ox,  he 
may  place  the  difference  to  the  credit  of  intellectual 
labor.  The  numerical  estimate  has  been  made  liberal, 
since  something  is  to  be  allowed  for  the  superior  physi- 
cal form  of  the  man. 

Whatever  possesses  want-satisfying  capacity  and 
appropriability  is  a  form  of  wealth,  whatever  may  be 
the  source  from  which  it  comes.  Its  origin  is  unimpor- 
tant in  the  classification,  and  it  may  or  may  not  be  the 
result  of  human  labor.  In  some  instances  it  is  not  so. 
The  original  and  indestructible  properties  of  the  soil 
are  not  the  result  of  human  effort,  and  recent  German 
thought  has  demonstrated  that  they  possess  an  original 
value,  from  limitation  in  quantity,  independently  of  the 
increased  value  which  results  from  their  artificial  im- 
provement. The  original  forest  trees,  water  powers, 
minerals,  some  wild  game,  and  many  other  things  owe 
the  value  which  they  possess  to  their  want-satisfying 
capacity,  and  their  appropriability,  not  to  the  mode  of 
their  origin.  That  origin  is  not  labor.  The  measure 
of  their  value  is  determined,  in  an  indirect  and  general 
manner,  by  labor.  A  man  might  be  willing  to  give  for 
one  of  these  spontaneous  products  of  nature  the  amount 
of  labor  which  would  produce  or  purchase  another 
product  of  equal  utility.  Labor  is  the  measurer,  not 
the  originator,  of  their  utility,  and  even  as  a  measurer 
is  indirect  and  tardy  in  its  operation.  The  doctrine 


LABOR   AND   ITS   RELATION   TO   WEALTH.  23 

that  labor  is  the  sole  originator  of  wealth  is,  perhaps, 
the  central  doctrine  in  the  system  of  Adam  Smith,  and 
it  was  an  efficient  instrument  in  his  hands  for  combat- 
ing the  Mercantilists  and  the  Physiocrats.  It  was 
accepted  as  a  grand  truth,  as  opposed  to  these  perni- 
cious systems,  and  it  has  served  the  purpose  of  a  truth 
in  the  history  of  the  science.  It  is,  in  fact,  a  grand 
error,  and  the  time  has  abundantly  arrived  for  its  criti- 
cal examination  and  essential  modification. 

Few  statements  are  more  common  in  text-books  of 
Political  Economy  than  the  assertion  that  "  nothing 
can  constitute  wealth  which  is  not  the  product  of 
labor."  As  the  statement  stands  it  can  only  mean 
that  every  commodity  classed  as  wealth  must  have 
actually  been  produced  by  labor.  In  this  form  it  re- 
quires but  a  single  illustration  to  refute  it.  The 
original  and  indestructible  properties  of  land  are 
wealth,  and  they  are  not  the  product  of  labor.  It  is 
less  erroneous  to  say  that,  though  commodities  may 
be  produced  by  nature,  their  exchange  value  is  the 
product  of  labor.  A  diamond  accidentally  discovered 
does  not  owe  its  utility  to  any  labor  actually  expended 
in  its  production ;  but  it  does  owe  the  measure  of  its 
value  to  a  calculation  in  the  mind  of  the  purchaser 
as  to  how  much  labor  would  be  necessary  in  order 
to  obtain  another  like  it.  The  seller  will  demand 
and  the  buyer  will  give  what  would  purchase  a  simi- 
lar commodity.  Actual  labor  is  not  the  criterion,  but 


24  LABOR   AND   ITS   RELATION  TO  WEALTH. 

supposed  labor,  or  mental  considerations  relative  to 
labor.  Utility  is  here  given  in  nature  without  labor ; 
value  is  measured  by  a  calculation  in  which  supposed 
labor  is  a  basis.  It  is  only  when  questions  of  quan- 
tity are  considered  and  the  measure  of  this  value  de- 
termined, that  even  considerations  of  labor  are  intro- 
duced. The  measure  of  the  exchange  value  of  all 
commodities  is  determined  indirectly,  approximately 
and  tardily,  by  considerations  relative  to  labor.  So 
much  only  of  this  doctrine  can  be  maintained.  A  few 
simple  illustrations  will  sufficiently  establish  this  point. 
Suppose  a  chance  medical  discovery  were  to  create  a 
demand  for  some  plant  previously  valueless.  The 
plant  would  have  value  immediately,  and  would  at 
once  be  exchangeable  for  something;  but,  ignoring 
the  additional  value  resulting  from  gathering  it,  its 
value  in  the  field  would  not  be  traceable  to  any  labor 
expended  in  its  production.  For  a  time  it  would  be 
unknown  how  much  labor  would  be  necessary  for  its 
production,  and  during  this  time,  neither  the  fact  of 
its  utility  nor  the  measure  of  its  value  could  be  re- 
ferred to  considerations  of  labor.  Only  after  a  time 
would  labor  determine  this  measure.  If  labor  were 
a  talisman  which  turned  everything  to  gold,  the  slag 
of  a  blast-furnace  should  have  value  as  well  as  the 
iron.  The  difference  between  them  is  in  their 
utility,  not  in  their  origin.  A  chance  chemical  discov- 
ery might  reveal  uses  for  the  slags  in  their  present 


LABOR  AND  ITS   RELATION   TO   WEALTH.  25 

form,  and  they  would  then  become  wealth ;  but  they 
would  have  been  a  product  of  labor  before  they  be- 
came wealth  as  well  as  after.  The  existence  of  their 
newly-acquired  utility  could  not  be  referred  to  labor, 
and  for  a  time  even  their  value  could  not  be  so  deter- 
mined. Aside  from  questions  of  measure,  wealth  is 
directly  traceable,  not  to  labor,  but  to  the  want- 
satisfying  capacity  and  the  appropriability  of  com- 
modities. 

Not  every  form  of  wealth  is  created  by  labor;  but 
every  form  of  labor  creates  wealth.  Man  toils,  not  be- 
cause labor  always  precedes  wealth,  but  because  wealth 
naturally  follows  labor.  The  possession  of  want-satis- 
fying products  is  what  the  laborer  seeks,  and  desire 
is  the  moving  force  in  the  whole  process.  Labor  is 
not  to  be  conceived  of  as  the  vis  a  tergo  that  pushes 
wealth  forward ;  but  wealth  is  to  be  conceived  of  as 
the  siren  that  lures  labor  onward.  Wealth  is  always 
the  cause  of  labor ;  labor  is  not  always  the  cause  of 
wealth.  There  are  spontaneous  natural  products,  and 
there  are  industrial  products ;  the  earth  may  be  self- 
subdued,  or  it  may  be  subdued  by  labor.  Nature 
subjected  and  appropriated  is  wealth ;  man's  subjec- 
tion of  nature  is  labor. 

Labor  imparts  want-satisfying  powers,  or  utilities, 
to  natural  agents.  These  utilities  are  of  four  kinds, 
and  may  be  arranged  in  four  corresponding  classes, 
namely,  elementary  utility,  form  utility,  place  utility 


26  LABOR   AND  ITS   RELATION   TO    WEALTH. 

and  time  utility.  New  matter  can  not  be  created  by 
man ;  but  by  chemical  and  vital  changes  in  existing 
matter  new  material  may  be  produced.  The  produc- 
tion of  new  material  creates  elementary  utility,  and 
this  is  preeminently  the  province  of  the  agriculturist. 
Mining  involves  some  change  of  place  in  the  ore, 
but  the  labor  of  discovering  and  freeing  it  from  the 
superincumbent  earth  is,  prominently,  a  creating  of 
elementary  value,  and  mining  should,  in  general,  be 
classed  with  agriculture. 

Existing  materials  generally  require  changes  of 
form  to  fit  them  for  satisfying  wants,  and  the  quality 
imparted  by  these  changes  is  form  utility.  This  is 
the  office  of  the  manufacturer,  and,  to  a  large  extent, 
of  the  merchant.  The  forming  of  wool  into  cloth,  of 
iron  into  tools,  of  wood  into  buildings,  of  stone  into 
walls,  etc.,  are  obvious  illustrations.  The  subdi- 
vision of  articles  purchased  in  bulk  to  suit  the  wants 
of  the  consumer  is  to  be  regarded  as  the  creation  of 
form  utility.  The  man  who  desires  only  a  pound  of 
a  particular  commodity  can  afford  to  pay  for  it  at  a 
higher  rate  than  if  he  were  compelled  to  purchase  a 
supply  greatly  in  excess  of  his  needs.  The  adaptation 
of  the  quantity  to  his  needs  creates  an  actual  utility 
for  him,  and  brings  many  enjoyments  within  his  reach 
which  would  be  otherwise  unattainable.  Subdivision 
creates  form  value,  and  its  reward  is  legitimate. 

A  material  in  the  requisite  form  may  need  removal 


LABOR   AND   ITS    RELATION   TO    WEALTH.  27 

to  the  proper  place  in  order  to  enable  it  to  satisfy 
wants.  Transportation  confers  on  commodities  the 
utility  of  being  where  they  are  wanted,  and  creates 
place  utility.  This  is  obviously  created  when  commod- 
ities are  brought  to  the  consumer,  but  is  not  less  truly 
created  when  the  consumer  is  carried  to  the  commod- 
ity. Place  utility  lies  in  the  relative  position  of  con- 
sumer and  commodity,  and  both  freight  and  passenger 
traffic  produce  it.  The  fact  that  it  is  relative  and  not 
absolute  place  which  determines  this  utility  distin- 
guishes it  from  form  value,  as  in  manufactures.  Manu- 
facturing processes  can  be  resolved,  in  the  last  analysis, 
into  changes  of  place.  The  carpenter  moves  shavings 
and  chips  from  the  wood  which  he  is  shaping.  The 
mason  locates  brick  and  mortar  in  contact  with  one  an- 
other. The  woolen  manufacturer  locates  fibres  of  wool 
and  coloring  matter  in  certain  positions.  All  these 
changes  of  place  are  irrespective  of  the  consumer,  and 
result  only  in  giving  form  to  the  product,  while  place 
utility  requires  a  relative  position  of  the  consumer  and 
commodity. 

A  material  in  the  necessary  form  and  place  may 
not  be  so  at  the  requisite  time  for  satisfying  wants. 
Ice  in  winter,  agricultural  implements  out  of  season, 
and,  in  general,  all  commodities  at  a  time  when  they 
are  not  wanted,  are  obvious  illustrations  of  products 
requiring  this  additional  utility  to  fit  them  for  con- 
sumption. The  fact  of  existing  at  a  time  when 


28  LABOR   AND   ITS   RELATION   TO   WEALTH. 

it  is  wanted  gives  to  a  commodity  the  attribute  of  time 
utility.  The  creation  of  this  value  is  the  office  of 
capital,  and  the  nature  of  capital  does  not  come  within 
the  limits  of  this  discussion ;  but  it  is  sufficiently 
obvious  that  time  value  results  from  human  effort  and 
abstinence.  Its  creation  is  a  chief  function  of  the 
merchant,  and  it  is  of  inestimable  benefit  to  his  cus- 
tomers. If  every  consumer  were  obliged  to  keep  on 
hand  a  supply  of  what  he  requires  for  sustenance  and 
comfort  during  indefinite  periods  of  disuse,  the  number 
of  comforts  which  individuals  could  enjoy  would  be 
reduced  to  a  minimum.  The  idle  capital  of  society 
would  be  increased  a  hundred-fold  and  the  list  of 
its  comforts  proportionately  reduced.  The  creation  of 
time  utility  by  the  merchant  is  one  of  the  most  benefi- 
cent of  human  industries,  and  its  reward  one  of  the 
most  legitimate. 

Having  defined  our  conception  of  Wealth,  Labor 
and  Utility,  it  may  be  well  to  apply  to  the  definition  a 
few  of  the  cases  most  difficult  of  classification  under 
prevailing  systems.  All  artistic  productions  are  crea- 
tions of  form  utility,  and  differ  from  each  other  only 
in  the  different  agents  to  which  this  quality  is  im- 
parted ;  the  architect  imparts  it  to  buildings,  the  sculp- 
tor to  marble,  the  painter  to  colors.  The  musician 
imparts  it  to  the  natural  agent,  sound,  and  the  public 
reciter  and  speaker  give  a  different  kind  of  form  value 
to  the  same  natural  agent.  The  teacher  is  a  pro- 


LABOR   AND  ITS   RELATION  TO   WEALTH.  29 

ducer  of  form  and  place  value,  more  especially  of  the 
latter.  The  confusion  which  arises  from  considering 
that  the  product  of  the  teacher's  labor  is  found  in 
the  mind  of  the  pupil  has  already  been  noticed.  The 
pupil  is  not  the  natural  agent  which  the  teacher  uses ; 
he  is  the  consumer  of  that  which  the  teacher  produces, 
and,  in  practice,  he,  or  others  in  his  interest,  pay  the 
teacher  for  his  product.  The  acquiring  of  instruction 
is  the  consumption  of  intellectual  nourishment,  as  eat- 
ing is  of  bodily  nourishment;  both  are  facilitated  by 
the  labor  of  attendants.  There  is  a  creation  of  minor 
form  utilities  in  the  carving  of  meat,  the  cutting  of 
bread,  etc.,  and  of  minor  place  utilities  in  the  passing 
of  plates  and  dishes.  In  the  school-room  there  is  a 
similar  carving  and  cutting  process  in  the  assigning 
of  lessons;  the  student  takes  his  mental  nutriment,  like 
his  physical,  in  portions  adapted  to  his  consuming 
capacity.  As  it  would  be  absurd  to  say  that  the  waiter 
and  the  cook  find  the  product  of  their  labor  in  a  utility 
imparted  to  the  body  of  the  person  who  eats,  so  a 
similar  absurdity  exists  in  supposing  that  the  teacher 
finds  his  product  in  a  utility  imparted  to  the  mind  of 
the  one  who  learns.  Both  eating  and  learning  are 
acts  of  consumption.  They,  in  each  case,  result  in  a 
capacity  to  labor  on  the  part  of  the  consumer,  but 
this  personal  endowment  is  not  to  be  confused  with 
the  products  which  may,  later,  result  from  the  exercise 
of  it ;  working  capacity  is  the  natural  result  of  assim- 


30  LABOR  AND  ITS   RELATION  TO   WEALTH. 

ilating  nutriment.  The  teacher  is  usually  the  waiter 
at  the  intellectual  table,  \vhile  the  cook  is  the  author 
of  the  text-books  which  he  uses ;  it  is,  however,  an  aim 
of  higher  education  to  unite  these  functions. 

It  is  unnecessary  to  state  that  any  natural  agent  not 
originally  wealth  becomes  wealth  when  it  receives, 
through  the  agency  of  labor  or  capital,  either  of  the 
four  utilities  above  noticed.  Air  has  place  utility 
when  forced  into  a  mine  or  a  diving-bell.  Water  has 
form  utility  in  a  fountain,  place  utility  in  a  street 
hydrant  or  watering  cart,  and  time  utility  in  the  res- 
ervoir of  a  manufacturing  village,  where  it  is  retained 
for  use  during  the  dry  season.  If  there  are  any  prod- 
ucts which,  at  first  glance,  appear  as  exceptions,  they 
are,  on  closer  inspection,  clearly  seen  to  be  illustra- 
tions of  our  definition  of  wealth.  Some  classes  merit 
more  extended  consideration  than  is  here  possible, 
but  it  is  believed  that  the  above  classification  will  be 
found  to  cover  the  whole  field  of  industrial  labor. 
Wherever  human  effort  produces  commodities,  it  will 
be  found  to  be  conferring  one  of  these  four  utilities  on 
a  natural  agent,  or,  in  other  words,  to  be  subjecting 
nature.  This  view  is,  singularly  enough,  presented 
in  a  work  that  is  old  and  familiar  enough  to  have 
well  attracted  the  notice  of  those  who  have  ransacked 
the  classics  for  fragmentary  allusions  to  economic 
science.  In  the  picture  of  the  origin  of  society  found 
in  the  book  of  Genesis,  man  is  first  represented  in  the 


LABOR  AND  ITS  RELATION  TO  WEALTH.  31 

primitive  paradisiacal  state,  conscious  of  no  artificial 
wants,  and  supplying  his  few  natural  wants  from  the 
gratuitous  productions  of  tropical  nature.  He  eats  of 
the  tree  of  knowledge,  and,  by  this  means,  becomes 
conscious  of  his  simplest  artificial  want,  and  of  the 
necessity  of  supplying  it  by  making  nature  service- 
able. He  passes  to  the  state  of  actual  development, 
with  the  primitive  paradise  behind  him  and  a  restored 
paradise,  as  the  ever  receding  goal  of  his  progress,  in 
the  indefinite  future  before  him,  and  it  is  here  that 
the  injunction  is  laid  upon  him,  or  the  law  is  written 
within  him,  the  fulfilment  of  which  involves  his  whole 
economic  development,  the  command,  namely,  to  "re- 
plenish the  earth  and  subdue  it" 


CHAPTER  III. 

THE  BASIS   OF   ECONOMIC   LAW. 

ECONOMIC  laws  depend  on  the  voluntary  action  of 
men,  and  the  science  therefore  professes,  in  effect,  to 
teach  how  men  will  act  under  given  circumstances. 
If  prices  rise,  it  is  because  some  men  choose  to  demand 
and  others  consent  to  give  more  money  than  formerly 
for  the  products  of  industry.  To  predict  such  a  rise 
is  to  foretell  the  action  of  the  human  will.  Assum- 
ing that  the  will  is  governed  by  desires,  the  meta- 
physical view  most  favorable  to  prediction,  we  still 
encounter  the  fact  that  the  motives  of  human  action 
are  the  ultimate  determining  forces,  and  that  a  mis- 
conception as  to  the  nature  of  these  motives  is  liable 
to  vitiate  any  conclusion  which  may  be  attained. 
The  value  of  the  results  of  economic  reasoning  de- 
pends on  the  correctness  of  its  assumptions  with  re- 
gard to  the  nature  of  man.  If  man  is  not  the  being 
he  is  assumed  to  be,  there  is  no  certainty  that  the 
conclusions  will  be  even  approximately  correct. 

It  is  more  than  can  be  here  undertaken,  to  prove, 
by  the  analysis  of  leading  works,  that  the  motives 
attributed  to  men  have  been,  in  fact,  erroneous. 


THE  BASIS   OF  ECONOMIC   LAW.  33 

That  must  be  done  by  the  reader  for  himself,  by  the 
study  of  those  works.  It  is,  however,  believed  and 
asserted  that  a  candid  reading  of  the  literature  of  this 
subject  will  produce  the  conviction  that  writers  have 
troubled  themselves  very  little  with  anthropological 
investigation.  Their  attention  has  been  employed, 
and  well  employed,  elsewhere.  They  have  assumed, 
as  the  basis  of  their  science,  a  certain  conception  of 
man,  and  have  employed  their  acuteness  in  determin- 
ing what  results  will  follow  from  the  social  labors  of 
this  assumed  being.  The  premises  have  not  been 
adequately  verified;  the  system  is,  in  so  far,  an  ideal 
one,  and  it  is,  therefore,  a  matter  of  same  chance 
whether  its  results  are  correct  or  not.  Economic 
science  has  never  been  based  on  adequate  anthropo- 
logical study. 

Inaccuracies  in  the  science  which  result  from  inade- 
quate conceptions  of  man  are  not  to  be  rectified,  as 
has  been  asserted,  by  a  proper  allowance  for  "  disturb- 
ing forces."  The  actual  course  of  a  cannon-ball  may 
be  determined  by  a  mathematical  computation  followed 
by  the  proper  allowance  for  atmospheric  resistance ; 
but  the  social  activities  of  men  cannot  be  determined 
by  assuming  that  man  is  a  being  of  a  certain  kind, 
elaborating  the  conclusions  with  nicety,  and  then  en- 
deavoring to  introduce  the  proper  allowance  for  the 
fact  that  man  is,  after  all,  a  being  of  quite  a  different 
kind.  As  Mr.  Ruskin  has  well  said,  such  disturbing 


34  THE   BASIS   OF  ECONOMIC   LAW. 

influences  are  rather  chemical  than  mechanical.  "  We 
made  learned  experiments  upon  pure  nitrogen,  and 
have  convinced  ourselves  that  it  is  a  very  manageable 
gas ;  but  behold !  the  thing  which  we  have  practically 
to  deal  with  is  its  chloride,  and  this,  the  moment  we 
touch  it  on  our  established  principles,  sends  us  with 
our  apparatus  through  the  ceiling." 

The  only  right  course  under  such  circumstances  is 
to  begin  at  the  beginning  and  determine  by  investiga- 
tion the  nature  of  man,  the  subject  under  considera- 
tion ;  and  this  course  should  be  adopted  whether 
existing  conclusions  be  true  or  false.  The  object  is 
not  so  mirch  to  attain  different  results  from  those 
already  reached,  as  to  attain  the  same  ones  by  a  more 
legitimate  method.  The  process  which  changes  some 
false  results  will  verify  many  true  ones.  The  image 
which  the  scientist  has  constructed  as  the  subject  of 
his  discussion  may  or  may  not  resemble  the  man  whom 
God  has  created ;  the  latter  only  is  the  true  subject  of 
political  economy.  The  science,  which  has  rested  on 
a  temporary  blocking  of  assumption,  needs  to  be  built 
on  a  permanent  foundation  of  anthropological  fact. 

Having  determined  that  the  man  of  whom  the  eco- 
nomics of  the  past  has  treated  is  largely  the  creature 
of  assumption,  consideration  will  farther  develop  the 
fact  that  the  assumed  man  does  not,  in  fact,  resemble 
the  real  one  in  several  important  respects,  and  that 
there  is  not  only  a  possibility,  but  a  moral  certainty 


THE   BASIS   OP   ECONOMIC   LAW.  35 

that  some  erroneous  conclusions  have  resulted  from 
this  discrepancy.  The  assumed  man  is  too  mechan- 
ical and  too  selfish  to  correspond  with  the  reality; 
he  is  actuated  altogether  too  little  by  higher  psycho- 
logical forces.  What  is  true  of  a  laboring  machine 
requiring  only  to  be  housed  and  clothed,  and  to  be 
fed,  —  that  is,  supplied  with  fuel  as  a  motive  power, 
—  will  certainly  not  be  altogether  true  of  a  laboring 
man  in  modern  society;  and  what  is  true  of  a  being 
whose  affections,  aspirations,  and  conscience  are  merged 
in  an  abnormal  love  of  acquisition  will  not  be  true 
of  those  who  accumulate  and  disburse  fortunes  in  the 
actual  world. 

The  inadequate  basis  on  which  the  traditional  sci- 
ence rests  is,  in  part,  responsible  for  the  growth  of 
the  German  Historical  School,  in  which  the  laws  of 
wealth  are  sought  by  a  study  of  recorded  facts,  rather 
than  by  deduction  from  assumed  premises.  Yet  he 
must  be  ill  informed  who  anticipates  that,  in  the  work 
of  this  popular  and  growing  school,  deductive  reason- 
ing itself  will  fall  into  disuse.  No  one,  perhaps,  uses 
such  reasoning  more  acutely  than  Professor  Karl  Knies, 
of  Heidelberg,  who  deserves,  as  much  as  any  one,  the 
credit  of  having  given  to  the  historical  method  a  sci- 
entific standing.  Logic  must  do  its  work,  but  its  re- 
sults must  be  verified.  What  is  here  claimed  is  that 
its  premises  need  first  to  be  verified.  The  assumptions 
of  political  economy  need  to  be  subjected  to  a  com- 


36  THE  BASIS   OF  ECONOMIC  LAW. 

parison  with  facts.  It  is  on  its  anthropological  side 
that  the  traditional  science  is  most  defective,  and  it  is 
by  adequate  studies  in  this  direction  that  results  may 
be  attained  which  history  will  confirm.  A  broad  field 
is  thus  opened  for  occupation.  The  first  steps  may  be 
slow ;  it  is  easier  to  view  a  promised  land  from  a  moun- 
tain top  than  to  capture  it  from  the  Canaanites.  It 
is  easy  to  take  in  at  a  glance  the  vast  results  that 
will  follow  from  reconciling  theory  and  practice  in  this 
department;  but  to  trace  the  elusive  laws  of  human 
nature,  and  to  search  through  the  maze  of  social  facts 
without  losing  the  grasp  upon  principles,  will  afford 
work  enough  for  one  generation. 

What  is  here  proposed  is  to  point  out  this  field,  and 
then  to  cultivate  it  to  a  slight  extent ;  it  is  to  take  from 
it,  as  it  were,  a  first  sod-crop,  which  will  in  nowise 
measure  the  ultimate  fertility  of  the  soil.  It  is  pro- 
posed to  consider  certain  facts  relative  to  the  nature 
of  man,  selecting  those  which  require  but  little  in- 
vestigation, and  which  need  only  to  be  stated  to  be 
admitted,  and,  later,  to  apply  these  facts  to  some 
economic  problems.  If  any  light  is  thus  thrown  on 
questions  now  in  doubt,  if  any  new  starting-point 
seems  to  be  attained  for  future  investigation,  or  if  any 
modification  results  in  economic  principles  as  now  un- 
derstood, much  greater  and  more  valuable  results  may 
be  expected  from  more  extended  inquiry.  The  sim- 
pler and  more  obvious  the  anthropological  facts  here 


THE   BASIS   OF    ECONOMIC   LAW.  37 

cited,  and  the  more  familiar  the  economic  questions 
to  which  they  are  applied,  the  stronger  is  the  infer- 
ence as  to  the  ultimate  value  of  completer  anthropolog- 
ical studies.  Such  studies  would  give  a  new  character 
to  political  economy.  They  would  verify  its  truths, 
correct  its  errors,  impart  to  it  a  kindly  and  sympa- 
thetic quality,  and  elevate  it  to  a  recognition  of  those 
higher  soul-forces  which  it  has  heretofore  practically 
ignored. 

It  is  not  merely  man  as  an  individual  that  needs  to 
be  considered.  A  man  is  not  independent.  So  close 
is  the  relation  between  him  and  others  of  his  race 
that  his  conduct  is  dictated  and  his  nature  transformed 
by  it.  Though  a  self-directing  being  of  the  highest 
organization,  he  is  made,  by  his  relations  to  others,  to 
be  an  atomic  portion  of  a  higher  organism,  —  society. 

An  organism  is  a  living  structure ;  and,  though  this 
phrase  suggests  the  need  of  formulating  a  definition 
of  that  indefinable  thing,  life,  it  serves  to  distinguish 
an  organism  from  other  structures.  The  parts  of  an 
organism  have  been  said  to  be  so  related  that  "each 
is,  at  the  same  time,  the  means  and  the  end  of  all  the 
others."  The  rootlet  of  a  tree  shares  with  the  remote 
leaf  the  nutriment  which  it  absorbs  from  the. earth, 
and  the  leaf  shares  with  the  rootlet  that  which  it 
gathers  from  the  sunlight  and  the  air.  This  universal 
interdependence  of  parts  is  a  primary  characteristic  of 
social  organisms;  each  member  exists  and  labors,  not 


38  THE   BASIS    OF   ECONOMIC   LAW. 

for  himself,  but  for  the  whole,  and  is  dependent  on  the 
whole  for  remuneration.  The  individual  man,  like  the 
rootlet,  produces  something,  puts  it  into  the  circulat- 
ing system  of  the  organism,  and  gets  from  thence  that 
which  his  being  and  growth  require ;  he  produces  for 
the  market,  and  buys  from  the  market.  Every  pro- 
ducer is  serving  the  world,  and  the  world  is  serving 
every  consumer. 

The  analogy  between  society  and  the  human  body 
was  familiar  to  the  ancients.  It  is  a  discovery  of  re- 
cent times  that  a  society  is  not  merely  like  an  organ- 
ism ;  it  is  one  in  literal  fact.  It  is  a  late  discovery 
that  social  organisms  develop  earliest  in  forms  corre- 
sponding, not  to  man,  but  to  the  lower  animals.  The 
same  characteristics  which  rank  an  animal  as  high  or 
low  in  the  scale  of  development  give  a  similar  rank 
to  a  society.  Social  organisms,  like  animal  forms,  are 
divided  into  four  general  classes,  distinguished  by  pre- 
cisely the  same  marks  as  those  used  in  the  biological 
classification.  There  are  social  vertebrates,  articulates, 
mollusks,  and  radiates.  The  distinguishing  marks  are, 
first,  differentiation,  and,  secondly,  cephalization,  or  the 
subjection  of  the  body  to  the  control  of  the  brain. 
The  more  unlike  are  the  parts  in  form  and  function, 
and  the  more  the  structure  is  subjected  to  the  direct- 
ing influence  of  a  thinking  organ,  the  higher  is  the 
society  in  the  scale  of  organic  development. 

Social   differentiation   is   division    of  labor,  a   thing 


THE  BASIS  OF   ECONOMIC   LAW.  39 

which  has  but  a  rudimentary  existence  in  the  most 
primitive  tribes,  which  develops  in  the  intermediate 
types,  and  is  carried  to  an  indefinite  extent  in  high  civ- 
ilization. In  everything  that  can  be  termed  a  society 
a  traceable  degree  of  interdependence  exists  among  the 
members ;  and,  with  advancing  civilization,  each  mem- 
ber labors  less  and  less  for  himself,  and  more  and  more 
for  the  social  whole.  This  is  economic  altruism,  to  the 
future  development  of  which  no  limits  can  be  assigned. 

The  solidarity  of  society  is  a  primary  economic  fact. 
Political  economy  treats,  not  merely  of  the  wealth  of 
individuals  who  sustain  complicated  relations  with  each 
other,  but  of  the  wealth  of  society  as  an  organic  unit. 
The  production  and  the  consumption  of  wealth  by 
society  will  be  found  to  embrace  its  whole  subject.  The 
world  is  before  us  with  its  resisting  elements,  the 
"thorns  and  thistles"  of  Genesis;  and  we  subdue  it, 
not  by  conquering  each  his  little  part,  but  by  collec- 
tively subjugating  all  nature. 

Society  holds  two  distinct  relations  toward  every 
man ;  it  is  the  object  of  his  efforts ;  he  is  the  object  of 
its  efforts.  He  produces  for  the  general  market ;  it  is 
his  study  to  ascertain  a  public  want,  and  to  create  what 
will  supply  it.  He  buys  from  the  general  market ;  he 
informs  himself  concerning  the  goods  of  many  pro- 
ducers, and  buys  wherever  the  things  offered  are 
adapted  in  quality  and  price  to  his  necessities.  What 
he  consumes  comes  from  every  quarter  of  the  earth. 


40  THE   BASIS   OF   ECONOMIC   LAW. 

Society  is,  thus,  to  be  regarded  as  one  party  in  every 
exchange  that  is  made  in  the  open  market. 

The  social  relation  reacts  on  the  nature  of  the  indi- 
vidual. Man,  the  molecule  of  society,  is  transformed  in 
his  whole  being  by  the  unifying  process  of  social  devel- 
opment. The  simple  organism  is  made  higher  and 
better  by  becoming  a  part  of  the  secondary  organism. 
The  changes  which  take  place  in  different  individuals 
vary  according  to  the  position  which  each  assumes  in 
the  organic  whole ;  the  man  who,  in  the  development  of 
society,  becomes  a  molecule  of  the  brain  of  the  social 
organism  undergoes  widely  different  modifications  in 
his  own  nature  from  those  experienced  by  the  man  who 
becomes  a  molecule  of  the  nutritive  organ.  The  sci- 
entist differs  in  mental  and  physical  development  from 
the  hand-worker.  Apart  from  frivolous  distinctions  of 
caste,  there  exist  classes  founded  on  differences  of  social 
function,  and  accompanied  by  real  differences  in  the 
individual. 

Low  organisms  of  every  sort  have  few  and  simple 
wants.  Primitive  tribes,  the  mollusks  and  radiates  of 
the  social  classification,  have  few  wants  in  the  aggre- 
gate, and  their  individual  members  have  correspond- 
ingly few.  Multiplicity  of  wants  marks  the  grade  of 
the  society  and  of  the  individual.  Simple  food,  little  or 
no  clothing,  and  the  rudest  of  shelter  suffice  for  the 
tropical  savage ;  nomads  require  more  varied  appli- 
ances, and  the  civilized  man  demands  an  indefinite 


THE   BASIS   OF   ECONOMIC  JLAW.  41 

number  and  variety.  Man,  the  consumer,  acquires, 
through  social  development,  an  infinitude  of  conscious 
needs ;  and  society,  in  its  capacity  of  producer,  diversi- 
fies its  mechanism  so  as  to  supply  them  all.  Society, 
as  a  consumer,  develops  an  infinitude  of  wants;  and 
man,  as  a  producer,  specializes  his  industrial  action  so 
as  to  assist  in  supplying  one  of  them. 

Closely  connected  with  the  growth  of  mere  compli- 
cation of  social  structure  is  the  growth  of  specific  vices 
and  virtues.  The  isolated  man  had  no  neighbors  to 
rob,  and  none  to  serve ;  his  possibilities  of  evil  and  of 
good  were  limited.  In  the  Mosaic  picture  the  fruit, 
knowledge,  the  eating  of  which  started  Adam  on  a 
career  of  moral  conflict,  awakened  in  him  the  con- 
sciousness of  his  simplest  artificial  and  distinctively 
social  want,  that,  namely,  of  clothing,  and  introduced 
him  to  a  life  of  labor.  The  growing  complexity  of 
the  economic  process  has  been  accompanied  by  an  in- 
creasing need  of  moral  force,  and  by  an  increasing 
amount  of  it  in  actual  operation.  Social  relations, 
wants  and  want  satisfactions,  sins  and  virtues  multi- 
ply in  corresponding  degree.  Together,  therefore, 
with  mere  altruism,  the  economic  principle  by  which 
man,  in  self-interest,  is  led  to  work  for  others,  there 
grows,  in  controlling  influence,  the  higher  altruism  of 
unselfishness.  Society  of  the  highest  type  is  not 
merely  differentiated  and  cephalized.  There  is,  in- 
deed, in  high  civilization,  increasing  division  of  labor, 


42  THE   BASIS   OF   ECONOMIC    LAW. 

and  a  progressive  control  of  the  social  body  by  a  think- 
ing organ ;  but  there  exists,  in  as  marked  a  degree, 
a  growing  subordination  of  brain  and  members  to  the 
dictates  of  moral  law.  This  is  the  great  and  neglected 
economic  fact  of  modern  times. 

With  the  growth  of  ideal  influences  in  society  as  a 
whole,  comes  the  chief  transformation  in  individual 
nature  which  is  traceable  to  social  influence.  Men's 
wants  are  not  merely  multiplied ;  they  are  spiritual- 
ized. Human  desires  extend  themselves  into  scien- 
tific, aesthetic  and  ethical  regions,  and  react  directly 
and  powerfully  on  the  production  of  wealth.  The 
relative  strength  of  the  animal  and  the  ideal  wants  in 
different  individuals  is  due,  in  part,  to  original  endow- 
ment, and,  in  part,  to  acquirement ;  and  this  latter  is 
largely  the  result  of  social  influences.  He  whose  occu- 
pation it  is  to  do  much  of  the  thinking  of  society 
cultivates,  perforce,  his  own  intellectual  nature ;  while 
he  who  merely  feeds  or  clothes  it  is  under  no  such 
elevating  influence,  and  may  suffer  from  a  powerful 
pressure  in  the  direction  of  animal  development.  By 
specializing  the  economic  functions  of  men,  society 
specializes  its  influence  on  their  nature. 

Every  man  has  his  scale  of  wants,  of  varying  inten- 
sity. The  products  of  social  industry  appeal  to  him 
with  different  degrees  of  power,  from  the  food  that 
sustains  his  life,  to  the  trifles  that  minister  to  his 
caprices.  Every  man  is  subject  to  both  the  animal  and 


THE   BASIS   OF   ECONOMIC    LAW.  43 

the  spiritual  desires.  The  most  cultured  is  liable  to 
hunger,  and  the  rudest  has  some  craving  for  knowledge 
and  some  appreciation  of  the  beautiful.  All  have  a 
sense  of  right.  Where  do  the  ideal  wants  fall  in  the 
scale  of  intensity?  Does  a  man  hunger  for  books  some- 
what as  he  hungers  for  bread,  or  does  he  place  such 
objects  among  the  luxuries  or  the  superfluities?  On  the 
answer,  in  each  man's  case,  depends  the  influence  which 
he  will  exert  on  the  economic  action  of  society.  The 
kinds  of  wealth  produced  and,  as  we  shall  see,  the  rates 
at  which  they  are  sold  are  largely  determined  by  the 
acquired  natures  of  men  as  consumers. 

The  lowest  wants  are  susceptible  of  complete  satisfac- 
tion; the  higher  are  indefinitely  expansive.  Appetite 
ceases  to  act  when  sufficient  nourishment  lias  been 
taken,  and  the  sense  of  cold,  when  the  body  has  been 
sufficiently  clothed.  The  pleasurable  sense  of  taste  is 
capable  of  less  complete  satisfaction ;  the  savage  eats 
long  after  hunger  has  ceased ;  and,  even  in  civilized  life, 
similar  phenomena  are  observed.  In  like  manner,  the 
desire  for  personal  adornment  causes  the  wardrobe  to 
be  increased  and  varied  long  after  the  need  of  simple 
protection  has  been  fully  met. 

Wants  of  this  medium  sort  expand  indefinitely,  but 
decrease  in  intensity  as  the  desired  objects  are  supplied. 
Pleasures  of  this  kind  tend  to  cloy.  The  first  gratifica- 
tion is  an  object  of  intenser  desire  than  the  second,  and 
the  second  than  the  following.  An  indefinite  number 


44  THE    BASIS    OF    ECONOMIC    LAW. 

of  such  acquisitions  would  each  afford  some  gratifica- 
tion, but  in  diminishing  degree. 

The  highest  wants  are  not  only  indefinitely  expansive, 
but  afford  undiminished  or  increased  gratification  at 
each  successive  attainment  of  the  objects  of  desire. 
The  more  a  man  knows,  the  more  ardently  he  seeks 
knowledge  and  the  things  which  secure  knowledge. 
The  more  he  enjoys  of  the  beautiful,  the  more  diligently 
he  continues  to  seek  it  in  art  and  nature.  The  better  a 
man  becomes,  the  more  earnestly  he  strives  after  every- 
thing that  tends  to  develop  character.  To  the  possible 
intensity  of  these  supersensuous  wants  there  is  no 
assignable  limit.  A  philosopher  may  forego  the  com- 
forts of  life  for  intellectual  ends ;  and  many  men  prefer 
a  life  of  "plain  living  and  high  thinking"  to  the  luxu- 
ries of  philistinism.  The  love  of  right  action,  and  the 
aspiration  for  worthy  character  may  subordinate  every 
lower  impulse.  But  it  is  not  merely  in  cases  where  the 
ideal  motives  overshadow  all  others  that  their  presence 
is  felt.  They  are  a  modifying  influence  in  every  man's 
conduct,  and  it  is  to  their  efficiency  in  society  as  a 
whole  that  all  progress  is  due. 

These  ideal  wants  are  all  unselfish.  The  true  and 
the  beautiful  are  desired  each  for  its  own  sake,  and 
the  desire  for  personal  worthiness  opposes  self-interest 
as  an  equal  antagonist.  Under  the  influence  of  such 
motives,  man  can  never  be  a  being  striving  solely  for 
personal  advantage,  and  society  can  never  be  wholly 


THE   BASIS    OF   ECONOMIC   LAW.  45 

given  over  to  an  ignoble  scramble  for  profit.  These 
motives,  of  course,  find  no  place  in  a  system  of  econom- 
ics based  on  selfishness.  At  best  they  receive  from 
such  a  science  a  slighting  recognition,  as  "  disturbing 
elements."  Can  such  a  system  be  maintained?  Is 
logic  on  its  side,  and  is  the  opposition  to  it  a  matter 
of  sentiment?  Do  the  hard  facts  of  life  sustain  the 
economic  science  which  dehumanizes  its  subject?  We 
shall  try  to  definitely  answer  these  questions  in  later 
chapters.  The  unselfish  forces  of  society  are  doing 
practical  work.  They  create  the  altruism  which  gives 
without  return.  It  is  not  do  ut  des,  but  simply  do, 
where  they  are  in  control.  They  have  filled  the  land 
with  schools,  churches,  art  museums,  hospitals  and 
numberless  non-mercantile  agencies  for  social  improve- 
ment. They  have  diverted  vast  amounts  of  wealth 
into  ways  of  which  no  account  can  be  taken  in  a  sys- 
tem based  on  self-interest  and  limited  to  the  field  of 
competition.  They  have,  as  we  shall  see,  created  a 
practical  department  of  non-competitive  economics, 
and  are  constantly  enlarging  its  sphere  by  encroach- 
ments on  the  field  where  competition  rules.  If  the 
extreme  and  narrow  view  be  taken  that  wealth  in 
process  of  disbursement  is  beyond  the  limits  of  eco- 
nomic study,  this  objection  may  be  met  upon  its  own 
ground.  It  may  be  shown  that  the  market  itself  is 
permeated  by  moral  influences,  and  that  the  competi- 
tive principle,  instead  of  being  supreme  and  resistless, 


46  THE  BASIS   OF   ECONOMIC    LAW. 

exists  at  best  by  sufferance,  is  subject  to  constantly 
narrowing  restrictions,  and  is  liable,  in  particular 
forms,  to  be  totally  suppressed  by  the  action  of  that 
moral  force  which  is,  in  reality,  supreme. 

A  want  that  is  universal  and  insatiable  is  the  desire 
for  personal  esteem.  It  is  a  main  spring  of  the  ener- 
getic action  on  which  the  accumulation  of  wealth  de- 
pends. It  adjusts  itself,  in  quality,  to  different  natures, 
becoming  low  vanity  or  worthy  ambition  for  public 
favor,  according  to  the  weakness  or  the  strength  of 
particular  intellects.  All  men  value  their  standing 
in  the  community,  though  they  take  different  ways 
to  secure  it.  It  is  this  desire,  in  the  main,  that  sets 
for  each  class  a  standard  of  living,  and  prompts  them 
to  effort  to  maintain  it.  It  tends  powerfully  to  ele- 
vate the  condition  of  the  poor,  and  is  a  main  reliance 
of  Malthusianism  for  the  counteracting  of  that  ten- 
dency to  multiply  in  number  which,  if  unchecked, 
would  depress  to  the  point  of  extreme  hardship 
the  condition  of  the  laboring  class.  It  is  a  chief 
incentive  to  the  prodigal  expenditures  of  the  very 
wealthy ;  and  at  the  same  time,  it  impels  to  the  ac- 
cumulations which  make  large  expenditures  possible. 
It  creates  a  limitless  market  for  articles  of  decoration, 
and  thus  assists  in  giving  a  stable  value  to  the  pre- 
cious metals,  which  are  the  basis  of  currency.  Changes 
in  the  supply  of  whatever  ministers  to  vanity  are 
neutralized,  in  part,  by  the  elasticity  of  the  demand. 


THE   BASIS   OF   ECONOMIC   LAW.  47 

This  desire  is  the  basis  of  fashion,  and,  in  this  field  of 
action,  dominates  the  production  of  all  form  utilities 
into  which  an  aesthetic  element  enters.  Consumers 
and  producers  pay  attention  to  its  despotic  dictates, 
since  what  is  most  saleable  to-day  may,  by  its  influence, 
become  a  drug  to-morrow. 

That  which  most  concerns  us,  in  connection  with  this 
powerful  economic  force,  is  its  action  in  supplementing 
the  ideal  motives  of  human  nature.  It  counterfeits 
taste,  intellect,  and  virtue  where  they  have  small  exist- 
ence. It  causes  low  natures  to  resemble  higher  ones 
in  their  outward  action,  and  elevates  the  general  con- 
duct of  society  toward  the  standard  set  by  its  best 
members.  The  newly  made  millionaire  with  no  taste 
for  art  becomes  a  purchaser  of  paintings,  meritorious  or 
otherwise,  according  to  his  tact  in  utilizing  the  judgment 
of  others  in  the  selection.  He  fills  his  library  with 
volumes  ordered,  possibly,  according  to  shelf-room,  by 
the  linear  foot  independently  of  contents.  In  the  ac- 
quisition of  wealth  the  man  whom  virtue  would  not 
deter  from  fraud  or  robbery  curbs  his  impulses  from  the 
love  of  commercial  reputation.  Mercantile  honor  has 
its  roots  in  genuine  morality;  but  its  visible  effects  are 
multiplied  by  the  love  of  personal  esteem. 

This  desire  not  only  counterfeits  virtue  in  natures 
where  it  is  lacking ;  it  cooperates  with  it  where  it  exists 
in  full  measure.  The  benevolence  which  founds  col- 
leges and  hospitals  is  called  out,  in  part,  by  their 


48  THE   BASIS    OF   ECONOMIC    LAW. 

monument-making  character.  There  is  much  in  the 
name  of  a  public  institution.  Yet  the  philanthropy 
which  disburses  fortunes  is  not  more  assisted  by  this 
worthy  love  of  esteem  than  is  the  virtue  which  guards 
men  from  contamination  during  the  process  of  acquir- 
ing fortunes. 

In  the  last  analysis  the  sense  of  right  in  men  is  a 
supreme  motive,  in  the  market  as  elsewhere.  It  is  the 
centripetal  force  in  economic  society.  Its  action  is  not 
an  occasional  or  "disturbing"  influence;  it  is  constant, 
and  increases  with  time  and  civilization.  If  classed  as 
a  disturbing  force,  it  promises  eventually  to  overshadow 
those  classed  as  normal.  There  is,  in  fact,  nothing 
whatever  of  a  disturbing  nature  about  this  motive ;  its 
whole  action  tends  to  harmony.  It  is  the  one  possible 
means  of  realizing,  in  practice,  those  "  economic  harmo- 
nies" which  Messrs.  Gary  and  Bastiat  have  thought 
they  perceived  in  the  unrestrained  action  of  selfish 
motives.  "  Every  man  for  himself  "  is  the  principle  of 
disorganization  and  chaos ;  "  every  man  for  mankind " 
is  the  principle  of  organic  unity.  The  more  the  action 
of  such  motives  increases,  the  more  harmoniously  and 
rapidly  will  social  development  proceed,  and  the  more 
speedily  will  the  highest  activities  of  the  individual  man 
be  called  forth.  Such  motives  demand  the  first  atten- 
tion and  the  profoundest  investigation.  A  truly  scien- 
tific study  of  their  action  will  afford  the  key  to  a 
political  economy  that  shall  explain  the  facts  of  man's 


THE  BASIS   OF   ECONOMIC   LAW.  49 

present  life,  and  give  promise  of  a  future  that  shall 
answer  the  cravings  of  his  nature. 

The  wants  of  men  are  either  latent  or  developed, 
according  to  their  own  intellectual  condition,  and  ac- 
cording to  the  grade  of  culture  of  the  society  to  which 
they  belong.  The  ignorant  man  in  a  civilized  state,  and 
the  primitive  tribe  as  a  whole,  have,  at  best,  but  a  latent 
desire  for  literature.  Wants,  when  developed,  admit  of 
three  distinct  conditions,  according  to  the  possibility  of 
gratifying  them.  The  desire  for  what  is  decidedly 
beyond  the  possibility  of  attainment  is  not,  in  a  healthy 
nature,  either  constant  or  active.  The  peasant  passes 
the  palace  with  indifference,  and  experiences,  at  most,  a 
desultory  and  transient  wish  to  be  its  occupant.  Such 
a  wish  is  a  day-dream ;  it  stimulates  to  no  effort,  and  its 
non-fulfilment  occasions  little  discontent.  In  passing  a 
dwelling  slightly  better  than  his  own  the  laborer  may 
experience  a  desire  of  a  different  and  more  effective 
character.  The  desire  for  that  which  is  attainable  by 
effort  is  active,  and  stimulates  to  exertion  in  pursuit  of 
the  object.  Failure  in  such  a  quest  occasions  lively 
disappointment.  When  the  object  has  been  attained, 
the  want  of  it  ceases,  and  the  active  desires  extend  them- 
selves to  remoter  objects. 

Wants  admit  of  these  three  conditions ;  they  are 
quiescent  when  the  object  of  desire  is  unattainable, 
active  when  it  is  attainable,  and  in  a  different  manner 
quiescent  when  it  is  attained.  The  first  condition  is 


50  THE   BASIS    OF   ECONOMIC    LAW. 

necessary  to  contentment,  the  second  to  ambition,  and 
the  third  to  tranquil  enjoyment.  Contentment,  ambi- 
tion, and  tranquil  enjoyment  are  not  inconsistent  with 
each  other ;  but,  on  the  contrary,  the  coexistence  of 
these  three  mental  states  is  the  natural  and  healthy 
condition  of  the  mind.  Despondency  sometimes  ex- 
ists in  fact,  as  other  unhealthy  conditions  exist ;  but 
it  is  not,  in  active  life,  the  prevailing  state.  In  a 
community  ordinarily  prosperous  men  tend  to  con- 
tentment, hopefulness,  and  enjoyment,  and  the  oppo- 
site conditions  are  the  exceptions. 

When  combined  with  contentment,  ambition  fur- 
nishes the  condition  of  healthy  economic  progress ; 
without  it,  it  is  an  element  of  danger.  A  low  grade 
of  contentment  without  ambition  is  the  cause  of  the 
security  of  caste-ruled  despotisms.  The  safety  of  re- 
publics especially  demands  that,  where  this  passion 
exists,  its  development  should  be  normal,  that  it  should 
strive  after  what  is  legitimately  within  reach  and  resign 
what  is  beyond.  It  acts  in  this  manner  wherever 
wealth  is  well  distributed  by  a  natural  process,  and 
where  the  social  system  is  not  regarded  as  unsettled 
and  subject  to  change.  Where  wealth  is  ill  dis- 
tributed, and  where  the  permanence  of  the  social 
system  seems  questionable,  there  are  the  conditions 
of  an  abnormal  ambition  which  is  an  element  of 
peril. 

The  mere  possibility  of  revolution  is  a  vitiating  ele* 


THE   BASIS   OF   ECONOMIC   LAW.  51 

ment  in  the  mental  processes  of  men.  It  brings  indefi- 
nite gains  seemingly  within  the  limits  of  attainment, 
and  undermines  contentment.  It  renders  those  ab- 
normal gains  independent  of  labor,  and  palsies  the 
productive  energies.  It  substitutes  an  eager  and 
hungry  waiting  for  spoils  for  the  healthy  desire  to 
earn  and  to  save  wealth.  It  is  the  basis  of  deadly 
enmity  between  social  classes.  The  natural  union  of 
contentment,  hopefulness  and  tranquil  enjoyment  is 
general  only  in  those  societies,  the  stability  of  which 
is  assured,  and  the  industrial  condition  of  which  affords 
to  members  of  every  class  the  opportunity  for  at  least 
a  small  amount  of  progress.  The  lazy  and  the  improv- 
ident may  even  then  repine ;  but  these  are  never  a  ma- 
jority. For  this  reason  a  republic  among  whose  people 
communistic  poison  has  begun  its  work  should  cling,  as 
a  ship  clings  to  its  anchor,  to  whatever  opens  a  door  of 
possible  progress  to  the  laboring  class.  It  should  give 
more  than  a  tolerant  hearing  to  the  theories  of  cooper- 
ation and  profit-sharing,  and  should  forgive  many  fail- 
ures before  rejecting  them  in  practice.  It  should 
treasure  moral  influences  and  everything  that  sup- 
plements their  action. 

The  leading  English  writers  on  political  economy 
have  introduced  a  distinction  between  so-called  "pro- 
ductive and  unproductive  consumption,"  the  former 
being  the  consumption  of  those  things,  the  effect  of 
which  is  to  enable  a  man  to  labor,  and  the  latter,  the 


52  THE  BASIS   OF  ECONOMIC   LAW. 

consumption  of  things  which  give  simple  gratification 
without  imparting  laboring  capacity.  This  distinc- 
tion is  of  interest  from  the  high  authority  on  which 
it  rests,  and  from  the  important  question  which  it  is 
sought  to  solve  by  its  use.  The  economic  effects  of 
luxury  and  of  frugality  are  the  real  questions  at  issue 
in  the  discussion  of  what  is  termed  productive  and 
unproductive  consumption.  Mr.  Mill  conveys  the  im- 
pression of  taking  peculiar  pleasure  in  this  distinction, 
and  of  conceiving  that  important  light  has  been  gained 
by  its  use. 

It  is  doubtless  true  that  the  employment  of  this 
distinction  for  the  purpose  indicated  is  unnecessary, 
and  that  it  involves  some  confusion  of  thought.  Pro- 
fuse expenditure  differs  from  frugal  living,  not  in 
producing  less  wealth,  but  in  destroying  more.  In 
itself  consumption  is  never  productive,  but  is  usually 
more  or  less  destructive.  A  certain  kind  of  consump- 
tion is  supposed,  by  its  reaction  upon  the  energies  of 
man,  to  result  in  a  subsequent  creation  of  wealth. 

It  would  doubtless  be  conceded  by  those  who  use 
this  distinction  that  it  is  impossible  to  rigidly  apply 
it  in  actual  life.  To  draw  a  line  between  that  which, 
when  consumed,  gives  capacity  for  labor,  and  that 
which  does  not,  is  impracticable.  Comforts,  as  well 
as  necessities,  may  increase  the  ability  to  work,  and 
necessities,  as  well  as  comforts,  may  give  gratification. 
The  food  of  nearly  every  man  satisfies  wants  higher 


THE  BASIS   OF  ECONOMIC   LAW.  53 

in  the  scale  than  that  of  simple  nourishment;  it  gives  a 
sensuous  gratification  distinct  from  its  nutritive  action. 
The  clothing  of  every  one  above  destitution  satisfies 
higher  wants  than  those  of  warmth  and  protection, 
those,  namely,  of  personal  adornment  and  of  social  con- 
sideration. So  with  the  dwelling,  and  the  entire  sur- 
roundings. It  is  impossible  to  say  that  food,  clothing, 
and  shelter  are  productively  consumed,  or  even  that 
distinguishable  portions  of  them  are  so. 

To  consume  only  productively  one  must  eat  the 
cheapest  food  that  will  adequately  nourish,  wear  the 
simplest  clothing  that  will  completely  protect,  and 
live  in  the  rudest  dwelling  that  will  fully  shelter. 
All  higher  wants  must  remain  unsatisfied,  and  the  man 
must  become  a  machine,  content  with  the  fuel  that 
keeps  him  in  motion.  Here  is  the  chief  weakness  of 
the  classification,  and  the  reason  for  mentioning  it  in 
this  connection ;  —  to  make  a  man  a  machine  is  to 
make  him  anything  but  productive. 

That  such  a  result  can  never  be  realized  in  fact  is  self- 
evident  ;  that  it  should  ever  be  conceived  of  in  thought 
is  an  evidence  of  how  little  trouble  even  the  greatest 
writers  on  political  economy  have  given  themselves  con- 
cerning the  real  nature  of  the  being  with  whose  actions 
they  deal.  If  the  laborer  is  an  engine,  his  motive  power 
is  fuel ;  if  he  is  a  man,  his  motive  power  is  hope.  It  is 
psychological  rather  than  physiological  forces  which 
keep  him  in  motion.  His  will,  and  not  merely  his 


54  THE   BASIS   OF   ECONOMIC   LAW. 

muscle,  is  an  economic  agent,  and  he  is  to  be  lured,  not 
pushed,  in  the  way  of  productive  effort.  Ambition  may 
have  feeble  sway  in  individual  cases,  but,  this  side  of 
the  gate  of  Dante's  Inferno,  it  is  never  entirely  extinct. 

We  have  seen  that  wants  on  the  margin  of  actual 
possession  are  the  active  incentives  to  effort.  Civilized 
man  struggles  no  longer  for  existence,  but  for  progres- 
sive comfort  and  enjoyment.  It  is  the  hope  of  small 
and  legitimate  gains  which  makes  general  contentment 
possible ;  the  absence  of  it  breeds  a  sullen  submission  to 
hardship,  tempered,  in  many  cases,  by  dreams  of  com- 
munistic plunder. 

Progress  has  limits,  and  many  wants  must  remain 
forever  unsatisfied.  By  a  kindly  provision  of  human 
nature,  such  wants  are  generally  quiescent.  Other 
wants  near  to  the  border  line  of  actual  possession  must 
be  active,  with  a  prospect  of  satisfaction  by  effort,  if 
happiness  is  to  be  attained.  It  is  the  want  of  things 
which  lie  far  above  the  line  of  necessities,  and  the  con- 
sumption of  which  would  be  classed  as  unproductive, 
which  is  the  constant  motive  power  in  industrial  prog- 
ress. The  comforts  to  be  enjoyed  to-morrow  set  in 
action  the  muscular  energy  gained  by  the  food  con- 
sumed to-day.  It  is  the  so-called  "unproductive  con- 
sumption "  which,  if  soul  forces  be  recognized,  is 
productive  of  wealth. 

The  ultimate  foundations  of  political  economy  lie 
deeper  than  the  strata  on  which  existing  systems  have 


THE   BASIS   OF   ECONOMIC    LAW.  55 

been  reared.  The  point  of  divergence  between  the 
present  science  and  the  true  science  lies  farther  back 
than  ordinary  inquiries  extend.  The  economist  of  the 
future  must  begin  at  the  beginning  of  all  knowledge, 
and,  with  Socrates,  pass  through  the  portal  from  which 
diverge  the  various  walks  of  scientific  inquiry,  and  over 
which  the  master  has  written  "<yvw0i  o-eavrov"  Self- 
knowledge  is  the  beginning  of  every  science ;  but  it  is  a 
peculiarly  comprehensive  self-knowledge  that  is  the 
basis  of  the  coming  economic  system.  Knowledge  of 
men  is  the  beginning  of  this  science ;  knowledge  of  the 
social  organism  of  which  men  are  members  is  the  middle 
and  the  end  of  it.  Individual  desires  are  molecular 
forces  in  the  general  life  of  society,  and  to  them  all 
phenomena  of  wealth  must  be  ultimately  traced.  It  is 
by  a  deeper  analysis  than  has  been  dreamed  of  in  our 
philosophy  that  we  may  hope  to  attain  that  higher 
insight,  that  knowledge  first  of  man,  and  then  of 
humanity,  which  is  the  basis  of  true  economics. 


CHAPTER  IV. 

THE  ELEMENTS   OF   SOCIAL  SERVICE. 

MEN  are  altruistic  in  their  economic  action ;  society 
is  egoistic.  Men  work  for  each  other ;  society  works 
for  itself.  For  many  purposes  the  most  available  con- 
ception of  the  entire  economic  process  is  that  of  the 
social  organism  as  a  producer,  laboring  to  serve  each 
individual  member  as  a  consumer. 

Wealth  is  the  means  by  which  society  serves  its 
members.  Resolving  social  service  into  effort  and 
gratification,  we  find,  as  in  our  former  analysis,  an 
outward  and  material  connecting  link  between  them. 
One  man's  effort  gratifies  another  man  through  the 
medium  of  some  specific  product ;  the  effort  of  society 
gratifies  all  its  members  through  the  medium  of  all 
products.  Serving  is  creating  social  wealth,  and  being 
served  consists  in  consuming  it. 

Production  and  consumption,  the  primary  elements 
of  social  service,  are  the  reverse  of  each  other  in  every 
particular.  Man  acts  on  nature  in  the  one  process; 
nature  on  man  in  the  other.  Utilities  come  into  exist- 
ence through  the  sacrifices  of  men,  and,  as  a  rule,  pass 
out  of  existence  in  the  process  of  promoting  their 
welfare. 


THE    ELEMENTS    OF   SOCIAL   SERVICE.  57 

Consumption  is  utilization,  and  the  destruction  of 
the  object  consumed  is,  in  most  cases,  an  unhappy 
attendant  circumstance  of  the  process.  It  is  not  its 
essential  element;  most  utilities  are  of  such  a  nature 
that  they  exhaust  themselves,  slowly  or  rapidly,  as  the 
case  may  be,  in  producing  their  effect  on  men.  Yet 
one  form  of  wealth,  land,  which  is  not  created  by 
labor,  is  not  destroyed  in  utilization.  It  may  be  im- 
proved or  injured  to  an  indefinite  extent ;  utilities  may 
be  added  to  it  or  taken  from  it;  but  to  create  or  to 
destroy  space  on  the  surface  of  the  earth  is  beyond 
human  power.  The  primary  service  rendered  by  land  is 
that  of  affording  standing  ground  and  travelling  room  ; 
although  in  nearly  every  locality  short  of  the  poles 
or  the  deep  sea,  it  has  an  ultimate  capacity  to  become 
a  food  producer.  A  man  utilizes  or  consumes  land 
when  he  stands  on  it  or  drives  across  it.  He  consumes 
a  mountain  when  he  causes  it  to  lift  him  a  thousand 
feet  into  the  air,  and  to  afford  a  view  of  the  river  valley. 
In  another  way  he  consumes  the  valley  itself  by  look- 
ing upon  it  and  enjoying  its  beauty.  The  attractions 
of  a  landscape  are  utilities,  and  to  enable  them  to 
produce  their  effect  on  the  human  sensibility  is  one 
mode  of  consumption. 

Wealth  is  commonly  and  accurately  termed  "means"; 
utilization  is  the  end  to  which  it  corresponds.  Maxi- 
mum utilization  is  the  goal  of  the  economic  process, 
the  summum  bonum  of  social  economy.  The  mere 


58  THE    ELEMENTS   OF   SOCIAL   SERVICE. 

quantitative  increase  of  wealth  is,  indeed,  a  factor  in 
that  result;  but  it  is  one  factor  only.  The  greatest 
social  wealth  does  not  necessarily  create  the  greatest 
social  weal ;  that  result  depends,  in  a  great  degree, 
on  the  quality  and  the  distribution  of  the  weal-con- 
stituting element.  The  securing  of  the  greatest  quan- 
tity, the  highest  quality,  and  the  most  equitable  dis- 
tribution of  wealth  is  the  rational  goal  of  economic 
society.  How  much  this  involves  we  shall  later  see. 

In  a  loose  sense  production  and  consumption  over- 
lap each  other  in  time ;  in  a  more  accurate  sense  they 
are  completely  distinct,  and  the  terminal  point  of  the 
one  process  marks  the  initial  point  of  the  other.  The 
difference  lies  in  the  two  uses  of  the  word  consump- 
tion. 

The  desire  for  a  useful  object  induces  a  secondary 
desire  for  whatever  may  become  a  means  of  securing 
it.  The  need  of  a  dwelling  for  shelter  induces  a  sec- 
ondary desire  for  the  stone,  brick,  and  lumber  that 
will  compose  it,  and,  again,  for  the  trees  that  will 
furnish  the  lumber,  the  quarries  that  will  furnish  the 
stone,  etc.  If  the  gratification  of  these  mediate  wants 
be  regarded  as  a  subordinate  variety  of  utilization, 
then  production  and  consumption  are  jointly  in  prog- 
ress in  most  industrial  operations.  The  utilizing  of 
trees  is  the  production  of  lumber,  and  that  of  lumber 
is  the  production  of  houses.  The  ultimate  end  is  the 
direct  gratification  of  a  want  of  man's  nature.  Pro- 


THE    ELEMENTS   OF   SOCIAL   SERVICE.  59 

duction  continues  till  that  goal  is  reached;  final  utili- 
zation, or  true  consumption  begins  at  that  point;  but 
secondary  consumption  may  be  traced  backward  through 
all  the  steps  by  which  the  goal  is  approached.  Every 
step  that  brings  us  nearer  to  the  end  satisfies  a  mediate 
desire.  It  may  not  be  illogical  to  apply  the  term  con- 
sumption, as  is  commonly  done,  to  this  secondary  utili- 
zation; but  it  is  illogical  to  fail  to  distinguish  its 
peculiar  quality,  and  to  neglect  to  use  a  qualifying  ad- 
jective to  mark  the  distinction.  Consumption  in  the 
full  sense  is  that  final  utilization  which  is  distinct  from 
production  in  time,  and  the  opposite  of  it  in  quality. 

In  this  use  of  terms  the  production  carried  on  by 
society  as  an  organic  whole  includes  the  process  of 
exchange,  and  involves  that  of  distribution.  The 
four  traditional  divisions  of  economic  science  are  not 
distinct  and  coordinate.  In  the  very  act  of  complet- 
ing a  product  society  passes  it  many  times  from  hand 
to  hand.  One  producer,  or  group  of  producers  digs  ore, 
another  smelts  it,  another  rolls  the  metal,  another  cuts 
it,  with  the  result  that  society  has  produced,  perhaps,  a 
keg  of  nails.  Each  step  in  the  process  has  involved  a 
transfer  of  products,  and  the  end  is  marked  by  an 
exchange  of  a  different  kind.  In  this  last  exchange 
the  act  by  which  society  disposes  of  a  product  com- 
pleted and  ready  for  final  utilization  may  be  regarded 
as  the  terminal  act  of  social  production.  The  acquir- 


60  THE   ELEMENTS   OF   SOCIAL   SERVICE. 

ing  of  that  product  by  the  user  may,  in  like  manner, 
be  classed  as  the  initial  act  of  consumption. 

Division  of  labor  specializes  man's  productive  action 
in  two  ways.  There  is,  first,  a  broadly  qualitative  divi- 
sion of  labor,  which  assigns  to  an  extensive  group  of 
producers  the  creation  of  a  single  complete  product, 
like  the  keg  of  nails  above  referred  to.  A  subdivision 
assigns  each  of  the  general  steps  in  the  process  to  a 
subordinate  group.  Mining,  smelting,  rolling,  and  cut- 
ting are  performed  by  specialists,  who,  in  each  case, 
give  to  the  material  the  particular  transformation 
which  they  have  learned  to  impart,  and  pass  it  to  the 
next  workers  in  the  series.  "  Touch  and  pass  on "  is 
the  social  order ;  and  each  transformation  adds  to  the 
material  a  particular  increment  of  utility,  a  sub-prod- 
uct, as  we  shall  later  have  occasion  to  term  it.  The 
creation  by  society  of  any  complete  product  involves 
a  series  of  exchanges  between  the  producers  of  the 
sub-products;  and  these  transfers  are  integral  parts 
of  the  general  productive  operation. 

Where  several  distinct  operations  are  performed  in  a 
single  manufacturing  establishment,  there  are,  of  course, 
no  exchanges  between  the  groups  of  workmen  who  per- 
form them.  Spinning,  weaving,  and  dyeing  are  mechan- 
ically distinct  processes ;  but  spinners  in  a  mill  do  not 
sell  their  product  to  the  weavers,  and  these,  again,  to 
the  dyers.  Yet  sales  do,  in'  effect,  take  place  here. 
These  sales  are  unique  in  quality,  and  stand  in  a  direct 


THE    ELEMENTS   OF   SOCIAL   SERVICE.  61 

relation  to  distribution.  The  sellers  are  all  the  work- 
men ;  the  only  buyers  are  the  employers,  and  the  result 
of  the  sale  is  a  division  between  these  parties  of  the 
value  which  the  mill  creates.  The  full  discussion  of 
this  transaction  is  reserved  for  the  chapter  on  wages. 

Logically  exchange  and  distribution  are  distinct  from 
each  other ;  practically  they  are  merged.  The  same 
series  of  acts  performs  both  functions.  Exchanges  are 
specific  transactions  between  individuals ;  distribution 
is  a  general  process  performed  by  society  as  a  whole. 
It  is  a  division  of  the  income  of  society  among  its  mem- 
bers, and  is  effected  by  means  of  all  the  interchanges  of 
products  which  take  place  between  individuals. 

As  ordinarily  defined,  exchange  and  distribution  are 
not  even  logically  distinct.  Scientific  treatment  de- 
mands that  the  logical  separation,  at  least,  shall  be 
maintained;  and  it  may  be  so  by  rational  definitions. 
Exchange  is  a  qualitative  diffusion  of  wealth ;  distribu- 
tion is  a  quantitative  diffusion.  Exchanges  determine 
in  what  concrete  things  a  man's  wealth  shall  embody 
itself;  distribution  determines  how  much  of  that  wealth, 
in  abstract  quantity,  there  shall  be.  If  a  farmer,  having 
surplus  wheat,  sells  it  for  an  equivalent  in  clothing  and 
implements,  his  wealth  changes  its  form  of  embodiment, 
but  not  its  amount.  His  assets  acquire  a  new  character 
by  his  visit  to  the  market,  but  the  inventory  shows  the 
same  sum  total  as  before. 

Yet  there  is  something  in  the  sales  constantly  going 


62  THE   ELEMENTS    OF   SOCIAL   SERVICE. 

on  in  society  which  has  the  effect  of  determining  what 
commodities  are  to  be  regarded  as,  in  abstract  value,  the 
equivalents  of  each  other.  This  influence  has  assigned 
to  the  farmer's  wheat  a  certain  purchasing  power,  fixed 
the  quantity  of  clothing  and  implements  which  he  can 
get  for  it,  and,  by  this  means,  determined  his  share  in 
the  general  wealth  of  society.  This  determining  influ- 
ence is  the  adjustment  of  ratios  of  exchange  in  the 
general  market. 

An  exchange  involves,  first,  a  bargain,  and  secondly, 
a  double  transfer  of  commodities.  The  bargain  in- 
volved in  the  transfer  is  not  a  part  of  it.  The  fixing 
of  the  rate  at  which  two  commodities  shall  be  ex- 
changed is  antecedent  to  the  act  which  changes  the 
ownership  of  the  articles.  The  fixing  of  a  rate  of 
exchange  is  an  act  in  social  distribution,  while  the 
double  transfer  of  the  commodities  themselves  is  all 
that,  in  the  last  analysis,  there  is  in  the  process  of 
exchange.  The  establishment  of  market  prices  for 
everything  determines  every  producer's  share  in  the 
varied  results  of  social  industry,  and,  as  already 
stated,  is  identical  with  the  process  of  social  dis- 
tribution. If  the  fixing  of  rates  be  not,  in  the  dis- 
cussion, kept  sharply  distinct  from  the  mere  change 
of  ownership  of  the  commodities  themselves,  then  the 
term  exchange  can  have  no  definiteness  of  meaning. 
If  the  distinction  be  made,  and  if  the  term  be  applied 
to  the  rate-adjusting  operation,  it  becomes  the  name 


THE   ELEMENTS    OF    SOCIAL   SERVICE.  63 

of  the  transaction  by  means  of  which  society  as  a 
whole  divides  its  income.  Exchange  in  general  means, 
thus,  distribution  analyzed  into  its  ultimate  acts,  and 
regarded  from  an  individualistic  point  of  view. 

In  the  strict  use  of  terms  an  exchange  reduces 
itself  to  a  double  alienation  and  a  double  acquisi- 
tion of  concrete  commodities.  "I  give,"  "I  take,"  — 
acts  of  will  made  known  in  the  briefest  speech,  are 
the  essence  of  the  double  transfer.  These  acts  re- 
quire but  an  instant  of  time,  and  no  effort  but  that 
of  communicating  the  result.  Time  may  have  been 
consumed  in  reaching  a  decision,  and  effort  in  ad- 
justing terms.  That  part  of  the  conversation  between 
a  buyer  and  a  seller  which  consists  in  discussing  the 
quality  of  goods  has  in  view  an  adaptation  of  prod- 
ucts to  the  needs  and  tastes  of  a  consumer.  It 
resolves  potential  utilities  into  actual  ones.  It  causes 
an  article  which  is  capable  of  rendering  a  service  to 
actually  render  it  to  the  user,  and  is  a  part  of  the 
general  process  of  mercantile  production. 

We  shall  consider  later  the  fact  that  actual  exchanges 
are  not  always  for  equivalents,  and  shall  endeavor  to 
place  in  its  proper  category  that  margin  of  illegiti- 
mate profit  which  a  shrewd  trader  may  make  both  in 
buying  and  in  selling.  He  who  parts  with  ten  units 
of  value  and  receives  twenty  accomplishes,  in  fact,  an 
exchange,  and  a  fraud  or  a  robbery  besides. 

The  bargaining  processes  which  determine  the  selling 


64  THE   ELEMENTS    OF    SOCIAL   SERVICE. 

price  of  finished  products  in  the  market  stand  in  a  less 
direct  relation  to  distribution  than  do  those  which 
adjust  wages;  the  latter  divide  a  value  between  em- 
ployers and  employed.  Wages  are,  as  we  shall  demon- 
strate, payments  for  a  certain  kind  of  product;  the 
agreement  to  work  for  an  employer  is  a  contract  on  the 
laborer's  part  to  sell  his  future  interest  in  the  product 
which  his  labor  will  assist  in  creating.  The  man  who 
agrees  to  run  a  sewing-machine  in  a  shoe  manufactory 
contracts,  in  effect,  to  acquire  and  to  sell  an  undivided 
share  in  the  shoes.  This  bargain  determines  the  return 
of  his  labor  more  directly,  though  not  more  really,  than 
the  later  transactions  which  determine  the  value  of  the 
shoes  as  completed  and  offered  in  the  market. 

The  primary  elements  of  social  service  are,  then,  the 
production  and  the  consumption  of  wealth  by  the  social 
organism  as  a  whole.  Exchanges,  or  double  transfers  of 
commodities,  are  integral  parts  of  social  production. 
The  adjustment  of  rates  of  exchange  constitutes,  in  the 
aggregate,  the  process  of  distribution.  This  is  a  divid- 
ing of  wealth,  in  abstract  quantity,  among  individuals, 
and  is  incidental  to  production  and  consumption  by 
society. 

Competition  is  a  term  commonly  made  to  include  the 
entire  process  of  adjusting  rates  of  exchange,  and  thus 
of  determining  distribution.  It  is  described  as  a  war- 
fare, and  when  looked  at  in  its  entirety,  presents,  in 
fact,  the  semblance  of  an  indiscriminate  mette,  in  which 


THE  ELEMENTS   OF  SOCIAL  SERVICE.  65 

the  element  of  strife  predominates.  It  is  not,  however, 
a  blind  contest ;  there  is  a  method  in  it,  the  analysis  of 
which  is  as  important  as  any  study  in  practical  eco- 
nomics. Strife  is  increasing  in  our  times  because  true 
competition  is  diminishing.  That  which  was  the  basis 
of  Ricardian  economics  is  slowly  passing  out  of  existence 
at  points  where  its  presence  is  most  needed,  leaving 
society  in  a  condition  anomalous,  full  of  peril,  and 
demanding  a  prompt  recourse  to  a  new  principle  of 
adjustment  in  the  distributing  of  the  rewards  of  in- 
dustry. 

What  is  loosely  termed  competition  consists,  first,  of 
a  rivalry  for  public  favor,  resembling,  not  a  battle,  but 
a  race ;  and,  secondly,  of  a  bargaining  process  having  the 
capacity  to  become  a  quasi-combat.  The  former  ele- 
ment only  is  true  competition,  and,  where  it  is  present, 
it  affects  the  contest  which  follows,  and  takes  the 
greater  part  of  the  belligerency  out  of  it. 

Ten  men  offer  similar  articles  in  the  market,  and  we 
buy  from  one  of  them ;  but  we  have  no  words  with  him. 
If  he  demands  too  much,  we  shall  buy  from  another;  he 
knows  this,  and  the  knowledge  forestalls  the  excessive 
demand.  The  tacit  recognition  of  the  presence  of 
several  buyers,  on  the  one  hand,  and  of  several  sellers, 
on  the  other,  is  a  substitute  for  much  argument.  In 
retail  traffic  bargains  are  made  with  a  minimum  of 
"higgling";  the  competition  preceding  actual  purchases 
takes  away  the  root  of  strife. 


66  THE  ELEMENTS   OF   SOCIAL  SERVICE. 

It  is  where  the  efforts  of  rivals  to  outdo  each  other 
in  serving  the  public  are  wanting  that  strife  ensues. 
Without  the  steadying  effect  of  true  competition  a 
bargain  becomes  a  contest  of  strength  in  which  one 
man's  gain  is  another  man's  loss,  a  transaction  which 
is  liable  to  strain  the  personal  relations  of  the  partici- 
pants, and  even  to  render  them  surly  or  desperate,  in 
cases  where  vital  interests  are  involved.  The  deter- 
mining influences  in  such  crude  adjustments  of  value 
are  shrewdness  and  ultimate  endurance  ;  and  a  man 
does  not  take  a  defeat  by  either  method  with  equa- 
nimity*. Still  less  do  classes  of  men  do  so  when  the 
issue  determines  their  means  of  livelihood  and  comfort. 

Such  is  coming  to  be  the  situation  in  the  relations 
of  capital  and  labor.  A  contest  is  here  in  process  on 
a  scale  of  magnitude  impossible  in  earlier  times,  a 
battle  in  which  organized  classes  act  as  units  on  the 
respective  sides.  The  solidarity  of  labor  on  the  one 
hand,  and  of  capital  on  the  other,  is  the  great  economic 
fact  of  the  present  day ;  and  this  growing  solidarity  is 
carrying  us  rapidly  towards  a  condition  in  which  all 
the  laborers  in  a  particular  trade  and  all  the  capitalists 
in  that  trade,  acting,  in  each  case,  as  one  man,  will 
engage  in  a  blind  struggle  which,  without  arbitration, 
can  only  be  decided  by  the  crudest  force  and  endur- 
ance. The  strained  relations  of  the  parties  in  the 
contest,  the  surliness  and  desperation,  the  threatenings 
of  literal  war,  are  already  the  phenomena  of  it.  The 


THE   ELEMENTS   OF    SOCIAL,   SERVICE.  67 

essential  peril  to  society  lies  in  no  superficial  features, 
such  as  rifle-clubs  and  dynamite  laboratories,  but  in 
the  fundamental  change  that  has  taken  place  in  the 
economic  relations  of  the  parties.  The  competitive 
principle  has  been  vitiated.  The  strife-allaying  ele- 
ment, the  healthy  rivalry  on  either  side,  has  yielded 
to  solidarity,  which  is  rapidly  growing.  Already  the 
hope  is  openly  expressed  of  such  a  union  of  all  labor 
that  a  universal  strike  may  become  possible  if  not 
actual. 

To  what,  then,  is  a  system  once  supposed  to  be 
nothing  if  not  competitive  actually  tending?  To  the 
annihilation  of  competition  at  the  point  where  its  strife- 
allaying  action  is  most  needed.  The  rivalry  between 
large  producers  and  small  ones  has  centralized  capital, 
and  substituted  production  by  a  few  great  firms  and 
corporations  for  that  which  was  formerly  carried  on 
in  numberless  little  shops.  The  reduction  of  the  num- 
ber of  establishments  has  made  producers'  unions  pos- 
sible, effecting  monopolies  in  many  directions,  and  thus 
partially  destroying  that  variety  of  competition  which 
formerly  fixed  the  prices  of  completed  products  in  the 
market.  The  aggregations  of  capital  have  given  a  one- 
sided character  to  transactions  between  employers  and 
employed.  A  corporation  owning  a  village,  and  with 
no  present  competitor,  must  hold  at  great  disadvantage 
a  thousand  laborers  who,  in  dull  times,  underbid  each 
other  for  employment.  Under  such  circumstances 


68  THE  ELEMENTS   OF    SOCIAL   SERVICE. 

Cobden's  formula  for  a  rise  of  wages,  "two  bosses 
after  one  man,"  could  scarcely  be  realized;  but  his 
formula  for  a  fall  of  wages,  "two  men  after  one  boss," 
would  describe  a  somewhat  constant  condition.  Indeed, 
could  the  supposed  case  become  actual,  could  the  com- 
petition of  capitalists  in  other  villages  be  completely 
excluded,  and  could  all  unions  of  laborers  be  prevented, 
then  wages  might  perhaps  be  adjusted  according  to 
a  formula  which  barons  under  the  feudal  system  em- 
ployed in  dealing  with  their  subjects ;  they  might  be 
gauged  "ad  miser icordiam,"  according  to  the  dictates 
of  a  compassion  which,  in  a  corporation,  might  or  might 
not  exist. 

The  supposed  case  is  a  highly  ideal  one.  Competi- 
tion on  the  employers'  part  has  never  been  excluded; 
and  on  the  other  hand  labor  unions  have  long  been 
actively  at  work.  With  the  tendency  to  consolidation 
on  the  side  of  capital,  such  unions  become  inevitable 
and  right.  Yet  they  oppose  to  the  solidarity  of  capi- 
tal a  solidarity  of  labor,  make  wage  adjustments  to  be 
bargains  between  two  parties  without  rivalry  on  either 
side,  and  threaten  to  introduce  into  the  industrial  sys- 
tem an  element  of  strife  for  which  there  is  no  analogy 
in  anything  which  appears  in  a  system  truly  competi- 
tive, and  which,  for  possible  brutality,  may  perhaps 
be  accurately  likened  to  a  club  contest  of  two  cave- 
dwelling  men.  It  is  Ricardianism,  the  competitive 
system  duly  "  let  alone,"  the  natural  action  of  self-in- 


THE   ELEMENTS    OF    SOCIAL,   SERVICE.  69 

terest  in  men,  that  has  brought  us  face  to  face  with 
this  condition. 

Can  an  organic  unity  grow  out  of  a  principle  of  strife? 
The  answer  is  obvious ;  and  the  inference  is  that  com- 
petition, as  it  has  existed,  is  not  a  principle  of  strife. 
Distribution  by  a  bargaining  process  without  true  com- 
petition is  something  by  which  no  society  could  have 
developed.  The  general  adoption  of  this  method  no 
society  can  survive.  The  strife  already  created  by  it  is 
rending  the  social  organism,  and  would  ultimately  de- 
stroy it  but  for  one  redeeming  fact,  —  the  certain  advent 
of  a  new  principle  of  distribution.  This  social  force  is 
new  only  in  its  mode  of  operation ;  fundamentally  it  is 
the  same  moral  force  that,  when  the  competitive  system 
was  at  its  best,  was,  in  reality,  supreme  in  the  economic 
life  of  men.  We  shall  examine  its  working  in  the  fol- 
lowing chapters,  a  study  which  must  begin  with  an 
analysis  of  the  nature  of  Value,  and  of  the  laws  that 
govern  ratios  of  exchange  in  the  general  market. 


CHAPTER  V. 

THE   THEORY    OF    VALUE. 

THE  charm  of  novelty,  at  least,  should  attach  to  a 
philosophy  of  value,  provided  only  that  it  prove  to 
be  the  true  one ;  for  it  is  certain  that  in  all  that  has 
been  written  on  this  much  elucidated  theme,  a  state- 
ment of  the  real  nature  of  the  thing  discussed  is  not 
to  be  found.  One  cause  of  this  marked  deficiency  is 
to  be  sought  in  the  incomprehensive  view  which  writ- 
ers have  taken.  The  great  fact  that  society  is  an 
organic  unit  has  been,  for  the  time,  forgotten,  and 
the  attention  has  been  fixed  on  individuals  and  their 
separate  and  intricate  actions  in  valuing  and  exchang- 
ing commodities.  It  is  as  though  the  physiologist, 
instead  of  studying  the  human  body  as  a  whole,  were 
to  confine  his  attention  to  the  microscopic  activities 
of  the  separate  molecules  that  compose  it.  Intricate 
and  nearly  profitless  would  be  such  a  study,  and  far 
too  intricate  and  profitless  has  been  the  study  of  the 
department  of  social  physiology  comprehended  under 
the  theory  of  value.  This  subject  can  never  be 
grasped  and  understood  until  the  organic  whole  is 
made  the  primary  object  of  attention.  The  value 
theory  must  receive  the  benefit  of  late  studies  in 


THE   THEORY   OF    VALUE.  71 

social  science.  The  conception  of  society  as  an  or- 
ganism must  be  applied  to  this  question,  which,  of  all 
questions  of  political  economy,  is  most  dependent  on 
the  comprehensive  view  thus  gained.  Then  only  will 
our  theories  cease  to  lose  themselves  in  the  intricate 
tracing  of  individual  activities,  which  is  only  social 
microscopy. 

Who  has  not  learned  to  his  sorrow,  how  unsatisfy- 
ing, in  fact,  are  such  discussions  of  value  as  claim  to 
be  particularly  scientific,  and  how  large  a  mass  of 
literature  he  may  patiently  read  through  without  sat- 
isfying himself  exactly  what  value  is  ?  Aside  even 
from  its  want  of  comprehensiveness,  the  reader  will 
find  the  prevailing  mode  of  discussion  leading  to 
specific  difficulties  and  contradictions,  from  which  he 
would  give  much  to  be  delivered.  He  will  learn 
that  utility  has  something  to  do  with  value,  that  it 
is,  indeed,  included  in  the  popular  meaning  of  the 
word ;  but  he  will  be  enjoined  to  break  with  this 
popular  notion,  and,  in  science,  to  limit  the  meaning 
of  the  general  term  to  something  formerly  called 
value  in  exchange.  Yet,  while  encouraged  to  inter- 
pose as  wide  a  gulf  as  is  possible  between  value  pro- 
per and  utility,  the  reader  will,  on  the  other  hand, 
find  that  he  is  allowed  to  confound  utility  with  some- 
thing once  termed  value  in  use.  He  will  find  that 
definitions  are  attempted  of  the  two  varieties  of 
value,  separately  considered;  but  he  may  search 


72  THE   THEORY   OF    VALUE. 

economic  literature  in  vain  for  a  satisfactory  formula 
for  value  in  the  generic.  What  value  is,  whether 
in  use  or  exchange,  few  have  attempted  to  tell  us 
at  all,  and  none  have  told  us  in  a  maimer  that  is 
clear  and  satisfying. 

Yet  who  supposes  that  a  universal  popular  idea  is 
baseless  ?  Who  would  claim  that  the  subtle  intui- 
tions that  determine  the  ordinary  use  of  terms  are 
not  a  guide  to  scientific  truth  ?  If  men  continue,  in 
spite  of  instructions,  to  use  one  term  where  the  econo- 
mist uses  two,  it  is  evidence  that,  in  some  way,  the 
thing  signified  must  be  generically  one;  that  there 
is,  in  the  seemingly  dual  idea,  a  unity  which  the 
scientist  has  not  as  yet  grasped.  If  the  notion  of 
utility,  of  usefulness,  persists  in  attaching  itself  to 
the  word  value,  whenever  used  in  common  speech, 
it  is  certain  that  there  is  a  closer  connection  between 
them  than  has  yet  been  detected.  Latin  valeo,  French 
valeur,  English  value,  as  well  as  other  foreign  syno- 
nymes,  all  include  the  idea  of  usefulness,  whatever  else 
they  may  signify ;  and  a  formula  that  will  harmonize 
with  this  permanent  usage,  and  express  the  mean- 
ing of  the  term  in  any  connection,  is  what  the  mind 
instinctively  craves. 

With  due  apology  for  the  audacity  of  the  attempt, 
and  a  consciousness  of  its  difficulty,  I  am  about  to 
hazard  the  effort  to  obtain  a  comprehensive  view  of 
value,  and  to  formulate  a  definition  that  shall  express 


THE   THEORY   OF    VALUE.  73 

the  fundamental  thought  which  is  present  whenever 
the  term  is  used.  Instead  of  finding  that  utility  is 
something  necessary,  indeed,  to  the  existence  of  value, 
but  not  included  in  its  proper  meaning,  something 
which  we  must  drop  out  of  mind  as  we  become  very 
scientific,  we  shall  find  that  utility  and  value  are  in- 
separably bound  in  thought,  and  that  the  attempt  to 
dissociate  them  betrays  a  failure  on  the  part  of  the 
scientist  to  follow,  with  his  analysis,  the  subtle  mental 
processes  that  have  determined  the  popular  mode  of 
expression,  and  given  the  public  a  truer  notion  of 
value  than  science  has  yet  attained. 

Value  is  an  abstract  term,  and  analysis  will  show 
that  the  abstraction  is  not  a  primary  one.  The  notion 
is  not  formed  by  fixing  the  thought  exclusively  on 
one  of  the  qualities  that  make  up  our  conception  of 
some  concrete  thing.  Such  a  process  may  be  termed 
&  primary  abstraction.  The  resulting  notion,  the 
quality  itself,  may  become  the  basis  of  a  secondary  or 
higher  abstraction.  The  quality  may  have  attributes, 
and  one  of  these  may  be  made  the  object  of  thought. 
As  the  primary  process  gave  us  an  attribute  of  a  con- 
crete thing,  the  secondary  process  gives  us  an  attri- 
bute of  an  attribute.  Certain  things  are  useful,  and 
a  primary  act  of  abstraction  presents  to  the  mind  the 
quality,  utility.  This  quality  may  exist  in  different 
degrees;  some  things  are  more  useful  than  others. 
To  determine  how  useful  a  thing  is,  is  to  measure  its 


74  THE   THEORY   OF    VALUE. 

utility.  Quantitative  measure,  then,  is  an  attribute 
of  the  quality,  utility.  The  fixing  of  the  thought 
exclusively  on  this  attribute  is  the  secondary  process 
of  abstraction ;  it  gives  us  the  notion,  measure  of 
utility,  and  it  is  this  that  I  propose  maintaining  as 
the  true  formula  for  value  in  the  generic.  Value  is 
quantitative  measure  of  utility.  Ahvays  and  every- 
where there  is  present  to  the  mind  that  makes  a  val- 
uation, whether  for  use  or  exchange,  the  conception 
of  a  concrete  thing,  of  a  quality  of  that  thing,  and  of 
the  quantitative  measure  of  that  quality. 

Value  and  utility  are,  therefore,  as  inseparable  as  a 
measure  and  that  which  is  measured.  The  concep- 
tion of  linear  extension  could  be  as  logically  separated 
from  the  conception  of  a  geographical  mile,  as  the  idea 
of  utility  from  that  of  value. 

On  the  other  hand,  value  and  utility  are  no  more  to 
be  confounded  with  one  another  than  separated ;  two 
inseparable  things  are  not  one  thing.  A  measure  and 
that  which  is  measured  are  not  identical.  The  metal 
lying  on  the  scales  possesses  the  quality,  weight ;  that 
general  quality  is  not  identical  with  the  fact  that  the 
weight  amounts  to  just  a  hundred  pounds.  The 
quality  is  not  to  be  confounded  with  the  quantity  of 
the  quality.  Utility  is  never  identical  with  value, 
either  in  use  or  exchange. 

Still  less  is  value  to  be  confounded  with  the  expres- 
sion for  it;  that  would  be  confusing  the  result  of  a 


THE  THEORY   OF   VALUE.  75 

measurement  with  the  object  used  by  the  measurer 
to  convey  that  result  to  another  mind.  A  unit  of 
linear  extension  is  not  identical  with  a  foot-rule,  nor 
a  unit  of  weight,  with  a  metal  disc  that  weighs  a 
pound.  Place  a  quantity  of  nails  on  one  arm  of  the 
scales,  and  a  metal  disc  on  the  other.  The  scales 
swing  freely;  the  nails  are  weighed.  Are  we  in  dan- 
ger of  saying  that  the  metal  disc  is  the  weight  of  the 
nails  ?  We  say  that  two  weights  are  equal.  There 
is  a  common  quality  in  two  objects,  and  the  measure 
of  that  quality  is  the  same  in  both.  Unless  very  un- 
discriminating,  we  shall  not  say  that  a  metal  disc  of 
smaller  and  finer  sort,  a  dime,  for  instance,  is  the 
value  of  the  nails.  There  is  a  quality  common  to 
nails  and  disc,  and  the  measure  of  that  quality  is  the 
same  in  both. 

We  need  to  pause  but  a  moment  to  distinguish  value 
from  price  ;  the  latter  is  a  mode  of  expressing  value. 
All  measurements  are  expressed  by  comparisons.  In 
the  rude  beginnings  of  mensuration  there  is  no  unit 
of  linear  extension,  and  the  length  of  an  object  is 
vaguely  expressed  in  terms  of  anything  that  chances 
to  be  near  it.  When  a  common  unit  is  adopted,  say 
the  length  of  a  human  foot  of  rather  prehistoric  pro- 
portions, measurements  are  expressed  in  terms  of  that 
common  standard.  Extension  is  the  same,  whether 
expressed  in  vague  general  comparisons,  or  in  feet 
and  inches.  Values  are  expressed  in  vague  general 


76  THE   THEORY   OF   VALUE. 

comparisons  until  the  adoption  of  a  unit  for  measur- 
ing utility ;  utility  is  the  same  whether  expressed  in 
the  ruder  or  the  more  accurate  way.  Measure  of 
utility  expressed  in  terms  of  a  conventional  unit  is 
price. 

If  the  essential  distinctions  have  now  been  clearly 
made ;  if  concrete  things,  a  quality  of  those  things,  the 
measure  of  that  quality  and  the  conventional  expres- 
sion for  that  measure  are  each  so  distinct  from  all  the 
others  that  there  is  no  danger  of  confusing  them,  we 
are  prepared  to  advance  to  the  essential  argument, 
and  prove,  if  possible,  that  value  is,  in  fact,  always  a 
measure  of  utility.  For  it  occurs  to  us  at  the  outset 
—  and,  if  it  did  not,  any  text-book  of  political  economy 
would  remind  us  —  that  things  having  widely  differ- 
ent degrees  of  apparent  utility  have  the  same  value 
in  the  market.  We  remember  the  diamond  and  the 
water  of  Adam  Smith's  illustration,  and  his  assertion, 
true  in  spite  of  criticism,  that  the  gem,  the  costliest  of 
articles,  satisfies  a  want  much  less  intense  than  that 
satisfied  by  the  water,  which  costs  little  or  nothing. 
Is  our  theory  stranded  at  the  outset? 

We  must  now  make  a  distinction  which,  so  far  as  I 
am  aware,  has  never  before  been  applied  in  political 
economy,*but  one  which,  as  I  hope  to  show,  is  abso- 
lutely essential  to  clear  reasoning  in  this  department  of 
the  science.  The  conception  of  utility  itself,  unan- 
alyzed,  is  misleading.  Simple  as  the  term  apparently  is, 

*This  chapter  was  published  as  a  review  article,  in  July,  1881. 


THE  THEORY  OF   VALUE.  77 

there  are  two  widely  different  meanings  in  it,  and  a 
value  theory  leads  to  directly  opposite  results,  accord- 
ing as,  in  the  use  of  terms,  the  one  or  the  other  is 
adopted.  What  is  utility?  Evidently  a  capacity  to 
serve,  a  power  to  satisfy  wants.  To  satisfy  wants  is  to 
change  the  condition  of  the  person  served,  to  bring  him 
from  a  lower  degree  of  happiness  to  a  higher.  Without 
the  useful  object  the  man,  for  the  time  being,  is  in  one 
condition ;  with  it  he  is  in  another.  The  power  thus  to 
modify  subjective  conditions  is  utility ;  the  difference 
between  the  two  conditions  affords  the  measure  of  that 
utility,  that  which  we  have  termed  value.  In  the 
measuring  process,  or  mental  valuation,  the  man  rea- 
sons :  "  Without  this  article  my  condition,  for  a  time, 
would  be  thus  ;  with  it,  it  is  thus ;  the  difference  meas- 
ures the  utility  of  the  object." 

The  cubic  mile  of  air  about  your  dwelling  sustains 
your  life  ;  of  course  it  has  infinite  utility.  But  has  it? 
Annihilate  it  and  see.  Other  air  at  once  takes  its 
place,  and  your  condition  remains  unaltered.  Under 
actual  circumstances  that  particular  volume  of  the  life- 
sustaining  gases  appears  not  to  have  the  power  to 
modify  your  condition.  Contrast  your  present  state 
with  your  state  if  there  were  no  air,  and  you  find  an 
indefinitely  wide  difference  ;  contrast  your  present  state 
with  that  in  which  the  annihilation  of  that  particular 
volume,  and  of  no  other,  would  have  left  you,  and  you 
find  no  difference  at  all. 


78  THE  THEORY   OF   VALUE. 

The  one  mode  of  estimating  gives  a  measure  of  what 
may  be  termed  absolute  utility ;  and,  in  the  case  of  air, 
this  is  indefinitely  great.  The  other  estimate  measures 
what  may  be  termed  effective  utility ;  and,  in  the  case 
of  air,  this  is  nothing.  Effective  utility  is,  then,  power 
to  modify  our  subjective  condition,  under  actual  cir> 
cumstances,  and  is  mentally  measured  by  supposing 
something  which  we  possess  to  be  annihilated,  or  some- 
thing which  we  lack  to  be  attained. 

Now,  is  not  this  the  utility  with  which  political 
economy  has  to  deal ;  and  is  not  the  former,  or  absolute 
utility,  that  with  which  actual  treatises  have  dealt? 
Moreover,  is  not  the  difference  radical,  and  the  failure 
to  distinguish  it  ruinous  to  any  philosophy?  Air  is 
not  wealth,  we  have  been  taught,  solely  because  no  one 
can  own  it.  True,  of  the  atmosphere  as  a  whole  ;  but 
cannot  a  man  own  some  of  it?  Let  him  but  close 
doors  and  windows,  and  he  will  have  it.  There  it  is, 
in  sufficiently  complete  possession,  and  undoubtedly 
useful,  in  the  prevalent  sense  of  the  term.  In  consis- 
tency we  should  term  it  wealth.  It  is  not  so  ;  and  we 
know  it ;  and  our  analysis  reveals  what  is  lacking,  —  ef- 
fective utility.  The  presence  or  absence  of  the  particu- 
lar volume  appropriated  is  indifferent  to  us,  under  actual 
circumstances;  the  presence  of  an  indefinite  supply, 
ready  to  replace  it,  destroys  its  importance.  It  is 
always  in  view  of  actual  circumstances  that  we  make 
our  economic  estimate ;  and  it  is  effective,  and  not  abso- 


THE  THEORY  OF   VALUE.  79 

lute  utility  that  is  the  basis  of  wealth  and  value.     Ab- 
solute utility  may,  for  present  purposes,  be  forgotten. 

The  measurement  of  effective  utility  in  our  illustra- 
tion was  simple ;  but  it  is  not  in  common  practice,  a 
comparison  of  two  simple  conditions  that  is  presented 
to  the  mind  when  mental  valuations  are  made.  The 
problem  is  more  complicated,  though  not  so  complex  as 
to  be  difficult  cf  analysis.  A  few  typical  cases  will 
sufficiently  illustrate  the  principles  involved.  Air  in  a 
closed  dwelling  was  effectively  valueless,  because  its 
withdrawal  caused  no  inconvenience ;  the  owner's  con- 
dition was  the  same  before  and  after  the  withdrawal. 
Remove  the  drinking  water  from  the  table  before  him, 
and  you  modify  his  status  ;  it  becomes  needful  that  he 
refill  the  glasses,  and  the  sacrifice  necessary  to  ensure 
the  refilling,  in  whatever  form  that  sacrifice  may  be 
made,  is  to  be  regarded  as  a  subtraction  from  the  sum 
total  of  his  gratifications.  If  we  could  attain  a  unit  for 
the  measuring  of  happiness,  it  would  be  a  compound 
standard  like  the  foot-pound  of  mechanics,  units  of  in- 
tensity multiplied  by  units  of  time.  Applying  such  a 
standard,  too  ethereal,  indeed,  for  practical  use,  to  the 
condition  of  the  man  in  our  illustration,  we  should  find 
that  his  day's  enjoyment  had  been  lessened  by  the 
withdrawal  of  the  water.  It  did  not  remain  wanting, 
but  was  immediately  restored ;  yet  the  restoring  process 
itself  caused  a  lessening  of  the  sum  of  our  supposed 
subject's  gratifications.  The  difference  between  the 


80  THE   THEORY   OF    VALUE. 

present  sum  of  his  enjoyments,  and  the  sum  of  enjoy- 
ments, had  the  removal  not  taken  place,  measures  the 
effective  utility  of  the  water.  Let  us  examine  a  third 
and  last  typical  case,  and  suppose  that  the  water 
removed  was  replaced  by  that  which  was  less  refresh- 
ing and  serviceable.  There  are  now  two  modifications 
of  the  owner's  subjective  status,  one  caused  by  the  sac- 
rifice of  replacing  the  water,  and  another  by  the  inferi- 
ority of  that  which  was  brought  in  its  stead.  His  sum 
of  gratifications  is  twice  lessened  ;  the  measure  of  the 
effective  utility  of  the  water  is  determined,  exactly  as 
before,  by  comparing  his  present  sum  of  gratifications 
with  that  which  he  would  have  attained  had  the  re- 
moval and  replacement  not  taken  place. 

Now  it  is  estimates  like  these  that  are  actually  made, 
in  measuring  the  utility  of  commodities.  There  is  at 
hand  a  well  from  which  to  draw, —  a  general  market ; 
and  the  removal  of  any  article  modifies  a  man's  condi- 
tion as  the  removal  of  the  water,  in  our  illustration 
—  he  must  replace  the  article  by  a  sacrifice,  and  he 
may  or  may  not  replace  it  completely.  If  he  replaces 
it  completely,  there  is  but  one  subtraction  from  the 
sum  of  his  enjoyments;  if  he  replaces  it  but  partially, 
there  are  two.  In  any  case  the  resultant  modifica- 
tion of  his  subjective  status  entailed  by  the  removal 
of  the  article  measures  its  effective  utility.  The  re- 
moval of  a  coat  lessens  the  owner's  enjoyment,  not 
by  the  difference  between  his  condition  with  such  a 


THE  THEOBY   OF  VALUE.  81 

garment  and  his  condition  with  none,  but  by  the  dif- 
ference between  the  sum  of  his  enjoyments,  had  the 
coat  not  been  taken,  and  the  sum  after  the  necessary 
sacrifice  shall  have  been  made  to  replace  it,  and  the 
substitute,  perfect  or  imperfect,  shall  have  been  brought 
into  use. 

An  individual  man  may  make  all  these  measure- 
ments; value  is  possible,  indeed  inevitable,  in  a  con- 
dition of  isolation.  Crusoe  compared  utilities  with 
one  another,  though,  having  no  bargains  to  make,  he 
was  under  the  less  necessity  of  forming  accurate  esti- 
mates; and  men,  in  society,  make  such  estimates  in- 
dependently. A  measurement  of  utility  made  by  an 
individual  gives  value  in  use,  not  at  all  identical  with 
what  passes  under  that  name  in  current  discussion, 
which  is  utility  itself,  but  the  quantitative  measure  of 
that  utility  to  an  individual  user.  We  have  now  to 
see  that,  in  a  sense,  measurements  of  utility  are  never 
made  by  any  other  than  a  single  independent  being. 
Society,  as  an  organic  whole,  is  to  be  regarded  as  one 
great  isolated  being;  and  this  being  may  and  does 
measure  utilities  like  a  solitary  tenant  of  an  island. 
This  great  personage  is  complex;  it  has  collections  of 
men  as  its  members,  and  single  men  as  its  molecules ; 
and  in  studying  the  internal  activities  that  take  place 
when  the  valuations  are  in  process,  we  shall  be  led 
into  a  sort  of  higher  or  social  physiology,  which  will 
develop  farther  than  has  yet  been  done  the  parallelism 


82  THE  THEORY   OF   VALUE. 

existing  between  the  individual  and  the  social  organ- 
ism. It  is  from  this  source  that,  as  was  stated  above, 
we  are  to  derive  our  chief  light  on  the  philosophy  of 
value.  After  the  comprehensive  view  has  been  at- 
tained and  the  general  movements  of  the  social  body 
traced,  we  may  adopt,  with  advantage,  the  analytical 
method,  fixing  the  attention  on  individuals,  and  find- 
ing how  they  deal  with  their  neighbors.  This  is  social 
microscopy. 

Market  value  is  a  measure  of  utility  made  by  society 
considered  as  one  great  isolated  being;  market  price 
is,  of  course,  that  measure  expressed  in  terms  of  a  com- 
mon standard.  If  the  market  value  of  a  ton  of  coal 
and  that  of  a  barrel  of  flour  are  equal,  it  signifies  that 
society,  as  an  organic  whole,  estimates  their  respective 
utilities  alike ;  if  the  prices  of  the  coal  and  the  flour  are 
the  same,  it  signifies  that  society  has  measured  their 
utilities  by  a  common  standard,  and  expressed  the  meas- 
urements alike,  in  terms  of  that  standard. 

We  need  to  be  detained  but  a  moment  by  the  diffi- 
culty that,  if  a  loaf  of  bread  is  worth,  in  the  market, 
only  a  small  fraction  of  a  gem,  all  the  loaves  in  the 
world  would  be  worth  but  a  few  gems;  while  they 
possess  indefinitely  greater  effective  utility.  It  is  es- 
sential to  their  present  market  value  that  they  be 
offered  and  estimated  separately.  Were  they  owned 
and  offered  as  a  whole,  their  value  would  be  indefi- 
nitely greater.  Let  some  bold  and  successful  monopo- 


THE  THEORY   OF   VALUE.  83 

list  effect  what  he  would  term  a  "corner"  in  bread, 
and  its  value  would  indefinitely  exceed  that  of  all  the 
gems  in  existence. 

More  serious,  in  appearance  only,  is  the  fact  of  the 
vast  service,  under  actual  circumstances,  which  many 
low-priced  articles  render.  How  measureless  is  the 
utility,  effective  as  well  as  absolute,  of  the  poor  man's 
loaf !  Its  removal  might  starve  him,  though  another 
were  to  be  had  for  a  dime. 

It  is  society,  not  the  individual,  that  makes  the  esti- 
mate of  utility  which  constitutes  a  social  or  market 
valuation.  That  is  a  part  of  our  definition,  —  measure  of 
service  rendered  to  society  as  an  organic  whole. 
Though  the  thing  were  priceless  to  its  owner,  it  might 
be  cheap  to  society. 

But  the  owner  is  a  part  of  the  social  body,  and  is 
the  organic  whole  indifferent  to  his  suffering  ?  If  so, 
society  is  an  imperfect  and  nerveless  organism.  It 
ought  to  feel,  as  a  whole,  the  sufferings  of  every 
member,  and  what  makes  or  mars  the  happiness  of 
every  slightest  molecule,  should  make  or  mar  the  hap- 
piness of  all. 

A  sympathetic  connection  between  members  of  so- 
ciety exists,  and  prompts  to  the  relief  of  suffering; 
a  sense  of  right  also  exists,  and  moves  the  social 
organism  more  powerfully  in  the  same  direction.  It 
results  from  these  influences  that  poor-laws  are  enacted 
and  alms-houses  established,  and  that  the  man  whose 


84  THE   THEOKY   OF   VALUE. 

last  obtainable  loaf  has  been  destroyed  may  call  upon 
a  social  agency  to  replace  it.  The  loss  entails  upon 
the  social  body  a  minute  expenditure  of  labor,  a  slight 
sacrifice  in  the  replacement,  and  this,  by  the  terms 
of  our  definition,  gauges  the  importance  of  the  loaf  to 
society.  The  question  upon  what  members  of  the 
social  body  the  loss  of  wealth  shall  fall,  is  distinct 
from  the  question  how  great  is  that  loss  itself;  the 
latter  question  determines  the  social  estimate  of 
effective  utility,  which  fixes  market  value ;  the  former 
question  is  one  of  equity  in  ths  internal  arrangement 
of  society.  Within  its  own  membership  the  social  or- 
ganism adjusts  losses  on  equitable  principles,  throwing 
them,  in  the  case  of  a  pauper,  first  on  a  local  commu- 
nity, and  then  on  its  individual  members  in  propor- 
tion to  their  taxes.  In  any  case  the  loss  of  a  neces- 
sary article  entails  upon  the  social  whole  the  neces- 
sity of  diverting  a  quantity  of  labor  from  other  pro- 
ductive directions,  and  this  sacrifice  gauges  the  market 
value  of  the  article. 

The  social  organism  is  never  nerveless ;  indepen- 
dently of  sympathy  between  man  and  man,  there  is 
a  beautiful  law  of  society  as  a  whole,  which  makes 
the  wants  of  every  member  a  matter  of  decisive  inter- 
est to  all.  It  is  society  as  a  whole  that  originally 
bought  the  loaf  from  its  producer ;  in  a  sense,  it 
bought  it  for  the  poor  man,  and  for  him  only,  and 
would  never  think  of  taking  it  from  him.  Parents 


THE  THEORY    OF   VALUE.  85 

would  not  take  away  a  child's  toy,  not  merely  because 
of  affection,  but  because  of  the  adaptation  of  the  toy 
to  the  child's  use.  Acting  for  the  family  as  a  whole, 
they  bought  the  plaything  for  the  child,  and  to  trans- 
fer it  to  themselves  would  lessen  its  service  to  the 
family.  Independently  of  personal  sympathies,  society 
assumes  a  paternal  relation  toward  particular  mem- 
bers, buys  articles  for  their  use,  consigns  the  articles 
to  them,  and  has  no  desire  to  take  them  again. 

Exchanges  are  always  made  between  an  individual 
and  society  as  a  whole.  In  every  legitimate  bargain 
the  social  organism  is  a  party.  Under  a  regime  of 
free  competition,  whoever  sells  the  thing  he  has  pro- 
duced, sells  it  to  society.  His  sign  advertises  the 
world  to  come  and  buy,  and  it  is  the  world,  not  the 
chance  customer,  that  is  the  real  purchaser.  Yet  it 
is  equally  true  that  whoever  buys  the  thing  he 
needs,  buys  it  of  society.  Under  free  competition 
the  world  is  seeking  to  serve  us,  and  we  buy  what  the 
world,  not  a  chance  producer,  offers. 

When  market  valuations  are  made,  society  is  pri- 
marily the  buyer.  Goods  in  individual  hands  are  offered 
to  the  social  whole,  and  the  estimate  of  utility  made 
by  that  purchaser  fixes  their  market  value.  In  the 
process  the  social  organism  is  true  to  its  nature  as  a 
single  being,  great  and  complex,  indeed,  but  united 
and  intelligent.  It  looks  at  an  article  as  a  man  would 
do,  and  mentally  measures  the  modification  in  its  own 


86  THE   THEORY   OF   VALUE. 

condition  which  the  acquisition  of  it  would  occasion, 
or  which  the  loss  of  it  would  occasion,  if  once  pos- 
sessed. "  With  the  article  my  condition  is  thus  ;  with- 
out it,  thus;  the  difference  measures  its  effective 
utility;"  such  is  the  mental  process  by  which  individ- 
ual or  society  makes  a  valuation.  The  three  typical 
cases  in  our  former  illustration  apply  equally  here. 
Would  an  article  in  possession,  if  removed,  be  replaced 
without  sacrifice,  like  the  air  in  a  closed  room  ?  The 
measure  of  its  effective  utility  is  nothing.  Would  it 
be  replaced  at  some  sacrifice?  Its  effective  utility  is 
gauged  by  the  sacrifice.  Would  an  imperfect  substi- 
tute take  its  place  ?  Its  utility  is  gauged  by  the  two- 
fold sacrifice  entailed.  These  cases  are  all ;  for  there 
is  nothing,  not  paintings  by  Raphael,  nor  gems  from 
monarchs'  diadems,  for  which  some  substitute,  perfect 
or  imperfect,  is  not  to  be  had. 

When  society,  as  a  consumer,  has  bought  a  thing, 
it  must  locate  it  in  the  organic  whole.  The  locating 
process  has  its  laws,  and  society  must  estimate  what 
is  offered  to  it  in  the  market  in  view  of  the  place  in 
the  social  body  which,  by  the  laws  of  this  higher 
physiology,  it  is  compelled  to  fill.  There  are  laws  of 
property,  fixed  principles  of  distribution ;  these  are 
facts  to  be  recognized,  conditions  which  determine 
the  estimate  which  society  is  to  make.  As  a  molecule 
of  nutriment  in  the  human  system  does  not  diffuse 
itself  through  the  body,  but  passes,  by  the  circulating 


THE  THEORY  OF  VALUE.  87 

organs  to  the  part  that  needs  it,  so  useful  commodi- 
ties, molecules  of  social  nutriment,  unerringly  follow 
the  circulatory  laws  of  the  social  system.  Nerve 
tissue  to  the  nerves,  bone  tissue  to  the  bones,  each 
particle  reaches  the  place  for  which  it  is  adapted. 

It  would  be  interesting,  in  itself,  to  analyze  the 
process  of  distribution,  and  determine  the  forces  which 
locate,  in  the  social  organism,  the  things  which  it 
buys  for  consumption.  It  would,  however,  extend 
this  chapter  unduly,  and  would  lead  us  at  once  into 
detailed  and  analytical  modes  of  study,  which  are 
foreign  to  our  present  purpose.  It  is  sufficient,  for 
the  present,  to  notice  that  there  are  fixed  laws  of 
social  circulation,  and  that  whatever  is  taken  from 
the  market  is  located  in,  the  social  body,  by  laws 
which  society  is  not  at  liberty  to  violate.  It  becomes 
evident,  then,  that  a  thing  may  have  a  fixed  market 
value,  while  its  value  in  use  is  indefinitely  great  or 
indefinitely  small,  according  to  its  location.  The  poor 
man's  loaf;  what  an  intense  desire  it  satisfies!  As 
removed,  its  utility  is  measured  by  hunger;  as  re- 
placed, by  hard  labor.  The  rich  man's  loaf;  what  a 
bagatelle  in  his  estimation  !  Even  its  absence  would 
but  modify  an  abundant  bill  of  fare,  while  its  replace- 
ment would  cost  an  inappreciable  sacrifice.  How 
values  in  use  would  be  augmented  could  the  location 
of  articles  be  arbitrarily  changed.  Yet  such  a  whole- 
sale confiscation  would  mean  the  most  violent  of  rev- 


88  THE  THEOEY  OF   VALUE. 

olutions,  and  would  lead  to  a  chaotic  condition  fatal 
to  the  welfare  of  all.  Yet  better  systems  of  social 
circulation  may  be  before  us,  in  the  future,  if  we 
can  but  wait  for  their  development. 

The  expression  value  in  exchange  has,  for  the  sake 
of  clearness,  been,  thus  far,  avoided;  since,  by  its 
origin  and  common  use,  it  is  adapted  to  signify  some- 
thing different  from  either  of  the  kinds  of  value  which 
we  have  considered.  It  should  mean  simply  indirect 
value  in  use,  or  the  measure  of  the  utility,  to  the 
owner  of  a  thing,  of  the  commodities  which  he  can 
get  in  exchange  for  that  thing  in  the  market.  It  is 
as  abstract  as  any  form  of  value ;  it  is  not  the  things 
themselves  which  the  person  can  get  in  exchange, 
but  the  measure  of  their  utility  to  him.  While  com- 
pletely distinct  from  market  value,  it  is  dependent 
on  it ;  society's  estimate  of  the  utility  of  an  article 
to  itself  determines  what  it  will  give  for  it,  and  what 
society  gives,  the  individual  seller  receives. 

The  inaccuracy  of  the  term  purchasing  power,  often 
used  as  synonymous  with  value  in  exchange,  consists 
mainly  in  its  implying  a  power  in  the  commodity 
itself  to  effect  a  purchase.  Such  power  resides  in 
men,  not  in  things.  If  it  be  intended  to  indicate 
the  quality  in  things  that  satisfies  wants  and  influ- 
ences men's  actions,  the  name  of  that  quality  is  utility. 
If  it  be  intended  to  denote  the  degree  to  which  it 
satisfies  wants  and  influences  action,  the  term  is  meas- 


THE  THEORY  OF  VALUE.  89 

ure  of  utilty,  or  value.  If  what  is  meant  be  the  rate 
at  which  exchanges  are  made,  in  consequence  of  this 
influence,  a  less  misleading  expression  would  be  ratio 
of  exchange,  or  barter  price.  This  is  one  of  society's 
two  modes  of  expressing  valuations ;  as  its  estimate  of 
utility  expressed  in  terms  of  a  conventional  unit  is 
ordinary  price,  so  that  estimate  expressed  in  general 
comparisons  is  barter  price. 

It  is  not  intended,  just  here,  to  make  a  treatise  on 
value;  and  the  intricacies  of  this  complicated  theme 
cannot  be  discussed,  nor  even  alluded  to.  It  would 
be  a  source  of  satisfaction  to  apply  the  broad  princi- 
ples laid  down  to  the  more  interesting  of  them.  We 
should  learn,  for  example,  the  incorrectness  of  the 
current  doctrine  of  the  absence  of  any  real  standard 
of  measurement  for  value.  The  standard  exists, 
though  psychological  in  character  and  difficult  of  use. 
Difference  of  subjective  condition,  measure  of  gratifi- 
cation, is  the  basis  of  the  measurements  of  utility 
which  give  value.  The  attempt  to  attain  a  unit  for 
such  measurements  will  not  lead  us  into  the  unprofit- 
able intricacies  which  result  from  the  theory  that  value 
is  fundamentally  relative,  based  on  mutual  comparisons 
in  which  A  measures  B,  and  B,  A,  and  there  is  no 
positive  unit.  Though  too  immaterial  for  accurate 
use,  the  standard  exists,  and  the  aim  should  be  to 
recognize  and  approximate  it. 

The    aim   of    this   chapter   is    attained   if,    without 


90  THE  THEORY   OF  VALUE. 

attempting  to  discuss  intricate  phenomena  of  value, 
it  has  succeeded  in  truly  stating  the  fundamental  prin- 
ciples which  govern  them ;  if  it  has  shown  the  nature 
of  value,  as  a  measure  of  a  quality  of  things,  its 
inseparable  connection  with  utility,  the  nature  of 
utility,  absolute  and  effective,  and  the  part  played  by 
society  as  an  organic  unit  in  valuing  processes.  After 
this  we  are  prepared  for  microscopy.  Now  we  may 
fix  the  attention  on  individuals,  and  their  complicated 
interactions.  They  will  no  longer  confuse  and  lead 
into  mazes  of  logical  wandering,  but  will  throw  the 
same  light  on  the  general  laws  with  which  we  start 
that  the  curious  movement  of  microscopic  corpuscles 
in  the  blood  throw  on  the  general  movement  of  the 
life-giving  current.  We  should  push  the  analysis  to 
greater  lengths  than  is  done  by  those  current  methods 
of  study  whose  fault  is  their  minuteness.  We  should 
study  the  very  nature  of  man  himself;  for  the  ultimate 
forces  of  society,  as  of  physical  nature,  are  atomic  ; 
the  individual  is  the  originator  and  the  end  of  every 
movement.  He  is  microcosmical,  like  the  monad  of 
Leibnitz,  a  mirror  of  the  universe ;  and  the  philosophy 
of  value  and  of  other  phenomena  of  society  can  be 
grasped  only  by  a  view  that  is  broad  enough  to 
include  the  entire  social  organism,  but,  at  the  same 
time,  minute  enough  to  apprehend  the  nature  of  the 
social  atom. 


CHAPTER  VI. 

THE  LAW  OF  DEMAND  AND  SUPPLY. 

VALUE  expresses  itself  in  the  quantitative  ratio  in 
which  commodities  exchange  for  each  other  in  the  mar- 
ket. This  ratio  is  determined  by  Demand  and  Supply. 
It  is  not  matter  but  utilities  which  are  created  by  labor 
and  destroyed  by  use,  and  which  are,  therefore,  the 
subjects  of  Production  and  Consumption ;  they  are,  in 
like  manner,  the  subjects  of  Exchange  and  Distribution. 

A  commodity  is  to  be  regarded  as  an  aggregate  of 
utilities  held  together  by  a  common  material  basis. 
These  qualities  are  of  different  kinds,  and  each  appeals 
with  a  certain  force  to  the  desires  of  men.  The  strength 
of  the  desire  for  a  commodity  equals  the  aggregate 
strength  of  the  desires  for  the  various  services  which  it 
can  render. 

Consumers  gratify  their  wants  in  the  order  of  their 
intensity,  as  far  as  their  available  means  permit.  A  dry 
but  useful  formula  will  best  define  the  demand  with 
which  political  economy  has  to  deal.  Let  A,  B,  C,  D, 
and  E  represent  different  objects  of  desire ;  let  the 
strength  of  the  wants,  in  the  case  of  a  class  of  persons, 
vary  in  a  scale  from  5  to  1,  that  for  A  being  the  most 


92  THE  LAW   OF  DEMAND   AND  SUPPLY. 

intense.  Let  the  price  of  each  be  represented  by  a 
single  unit  of  value.  The  scale  will  stand  as  follows:  — 

A,  B,  C,  D,  E,  =  Different  objects  of  desire. 
5,  4,  3,  2,  1,  =  Relative  intensity  of  desires. 

The  man  with  one  unit  of  means  available  for  present 
use  will  purchase  A  ;  the  one  with  two  units,  A  and  B ; 
the  one  with  four  units,  A,  B,  C,  and  D.  In  each  case 
there  will  be  a  definite  point  where  purchases  will  cease ; 
and  though  an  article  which  lies  beyond  that  limit  in 
the  scale  could  easily  be  purchased,  it  will  not  be  so, 
because  of  the  mental  attitude  of  the  possible  purchaser. 
The  man  with  three  units  of  means  will  not  buy  D  nor 
E,  though  he  might  take  them  both  and  have  a  unit 
left. 

Demand  for  what  falls  within  the  purchase  limit  is 
the  "effectual  demand"  of  the  traditional  theory.  The 
limit  is  determined  by  the  price  of  the  article,  and  the 
available  means  and  the  mental  status  of  purchasers. 
The  subjective  factor  last  named  is  the  most  inconstant, 
and  produces  the  most  sudden  changes  in  the  market. 

Under  a  regime  of  free  competition  prices  are  ad- 
justed by  a  simple  law.  If  the  supply  of  a  particular 
kind  of  commodity  be  regarded  as  fixed,  as  during  brief 
intervals  it  may  be,  it  will  be  offered  at  a  tentative  price, 
which  will  be  subsequently  raised  or  lowered  until  the 
quantity  offered  is  found  to  be  within  the  purchase 
limit  of  persons  enough  to  take  it.  The  tentative  price 


THE  LAW  OP  DEMAND  ASTD   SUPPLY.  93 

is,  in  many  cases,  too  high ;  a  part  of  the  supply  is  then 
found  to  lie  above  the  limit,  and  this,  therefore,  remains 
unsold.  If  there  is  a  necessity  for  selling  it,  the  price  is 
gradually  lowered,  and  each  step  of  the  decline  brings 
the  article  within  'some  one's  purchase  limit,  and  thus 
secures  a  new  "  effectual  demander." 

How  far  must  the  price  fall  in  order  to  accomplish 
this  enlargement  of  the  market  ?  The  answer  depends 
on  the  nature  of  the  want  to  which  the  utilities  em- 
bodied in  the  article  appeal.  The  necessaries  of  life  are 
the  objects  of  a  desire  so  intense  and  universal  that  it 
is  habitually  satisfied  by  nearly  all  members  of  a  com- 
munity. This  want  would  stand  at  5  in  our  ideal  scale, 
and  the  man  with  but  one  unit  of  means  would  use  it 
in  procuring  the  articles  which  supply  it.  It  is  impossi- 
ble to  secure  many  new  customers  for  the  plainest  kinds 
of  food ;  no  cheapness  of  provisions  will  induce  more 
men  to  eat  than  already  do  so.  To  induce  the  present 
purchasers  to  consume  more  than  they  have  heretofore 
done  would  be  another  method  of  enlarging  the  market ; 
but  the  possibility  of  doing  this  is  also  limited.  The 
want  of  mere  food  is  inexpansive ;  a  definite  quantity 
completely  satisfies  it,  and  most  persons  secure  about 
that  quantity. 

Wheat  is  not  the  plainest  material  for  food,  and  the 
desire  for  it  could  not,  with  strict  accuracy,  be  placed  at 
the  bottom  of  the  scale ;  but  it  is  near  enough  to  that 
point  to  illustrate  the  principle.  The  desire  for  wheat 


94  THE  LAW   OF   DEMAND   AND   SUPPLY. 

is  intense,  universal  and  inexpansive ;  a  definite  quan* 
tity  is  now  purchased,  and  but  little  more  is  wanted. 
This  fact  is  the  basis  of  the  very  disproportionate 
fluctuations  in  its  price  which  follow  changes  in  the 
supply.  A  large  crop  of  wheat  is  worth  far  less  in  the 
aggregate  than  a  small  one ;  and  statistics  have  led  Mr. 
Tooke  to  the  conclusion  cited  by  Mr.  Mill,  that  an 
unrelieved  deficit  of  one-third  in  the  general  corn  crop 
of  England  might  advance  the  price  tenfold. 

With  utilities  which  minister  to  wants  midway  in  the 
scale  the  case  is  different.  These  desires,  as  we  have 
seen,  are  indefinitely  expansive,  but  decrease  in  inten- 
sity as  the  desired  objects  are  supplied.  This  is  true 
of  what  may  be  termed  the  qualitative  increments  of 
the  necessaries  of  life.  An  improved  variety  may  find 
a  market  where  an  increased  amount  fails  to  do  so. 
The  man  who  has  food  enough,  such  as  it  is,  may  easily 
become  a  customer  for  something  better.  To  leave  the 
quantity  unchanged  and  improve  the  quality  is  to  make 
a  net  addition  of  a  qualitative  increment.  It  is  to  offer 
for  sale  no  new  commodity,  but  a  new  utility  of  a  higher 
sort,  one  which  ministers  to  wants  lying  midway  in  the 
scale  and  comparatively  expansive. 

For  this  reason  the  natural  growth  of  production 
tends  to  take  a  qualitative  direction,  improving  rather 
than  quantitatively  increasing  the  food,  clothing,  fur- 
nishings, etc.,  of  a  community.  Making  no  more  shoes 
than  formerly,  the  shops  of  Lynn  may,  by  making  better 


THE  LAW  OF  DEMAND  AND  SUPPLY.       95 

shoes,  create  many  more  utilities,  and  in  this  is  afforded 
an  outlet  for  an  indefinitely  increased  expenditure  of 
labor  and  capital.  General  over-production  of  qualita- 
tive increments  is  a  theoretical  and  practical  impossi- 
bility; and  the  turning  of  productive  energies  in  this 
direction  has  resulted,  in  fact,  in  constantly  raising  the 
standard  of  living  of  all  classes.  Whether  the  laboring 
class  has  received  its  due  proportion  of  benefit  from  this 
cause  is  a  question  generally  answered  in  the  negative ; 
but  of  the  fact  of  an  absolute  advance  in  the  standard 
of  living  of  that  class  there  is  no  doubt. 

Wants  of  the  highest  grade  are  indefinitely  expansive, 
and  increase  in  intensity  with  an  increased  supply  of 
the  objects  that  gratify  them.  They  are  less  univer- 
sally developed  than  those  of  the  lower  grades ;  but 
they  have,  in  every  man,  at  least  a  rudimentary  exis- 
tence, and  are  always  strengthened  by  exercise.  Cheap 
books  ensure  reading,  and  thus  an  increased  appetite 
for  reading.  A  fall  in  the  general  price  of  publications 
ensures  larger  sales  to  habitual  consumers,  and  increases 
the  number  of  the  consuming  class.  The  most  expan- 
sive of  all  markets  is  that  for  the  appliances  for  intel- 
lectual, aesthetic  and  moral  growth.  Here  is  a  limitless 
outlet  for  productive  energy,  and  the  extent  to  which 
it  is  utilized  is  the  gauge  of  genuine  economic  progress. 

Accompanying  the  highest  motives,  and  imitating 
their  action,  here  as  elsewhere,  is  that  love  of  esteem, 
that  universal  and  not  unworthy  vanity,  already  re* 


96  THE  LAW   OF   DEMAND   AND   SUPPLY. 

ferred  to.  This  motive  creates  a  highly  expansive 
market  for  whatever  acts  as  a  badge  of  social  caste. 
Yet  it  is  this  identical  want  the  working  of  which  pro- 
duces the  most  frequent  and  sudden  fluctuations  of 
value.  It  demands  conformity  to  a  changing  style  in 
clothing,  furnishings,  decorations,  dwelling,  equipage 
and  an  infinitude  of  semi-aesthetic  form  utilities. 

The  fluctuations  in  price  resulting  from  this  cause 
greatly  over-balance,  within  limited  intervals,  those 
resulting  from  changes  in  supply.  Fashion  makes  and 
destroys  utilities  capriciously  and  on  a  vast  scale.  The 
garment  that  is  to-day  as  comfortable  and  as  comely  as 
it  ever  was,  has  lost  over  night  the  caste-marking  power 
which  is  one  of  its  major  utilities,  and  its  value  is 
reduced  by  a  half.  Civilization  multiplies  the  finer  form 
utilities  the  value  of  which  fashion  dominates,  and  in- 
creases the  importance  of  this  changeful  influence. 

Under  a  regime  of  free  competition  most  utilities  have 
a  normal  price,  toward  which,  during  long  intervals  of 
time,  the  market  rate  continually  tends.  This  normal 
price  is  that  which  will  afford  to  the  workmen  engaged 
in  the  production  ordinary  wages,  to  the  capitalist  cur- 
rent interest,  and  to  the  employer  an  average  profit. 
If  the  selling  price  is  above  this  amount,  there  is  an 
inducement  to  enlarged  production,  which  reduces  the 
current  price  to  the  normal  limit.  If,  for  any  reason, 
the  market  yields  less  than  a  normal  rate,  there  is  a 
necessity  for  curtailed  production,  which  raises  the 


THE   LAW   OF   DEMAND    AND   SUPPLY.  97 

market  price  to  the  natural  limit.  During  a  long  term 
of  years  utilities,  as  embodied  in  products,  sell  for  the 
cost  of  production  and  an  average  profit. 

Amid  these  changes  in  the  quantity  produced  the 
cost  of  production  does  not  remain  stationary.  The 
normal  price  is  never,  during  a  long  interval,  fixed. 
Certain  commodities,  when  created  in  increased  amount, 
have  been  said  to  require  a  more  than  proportionate 
increase  of  labor.  To  double  the  present  wheat  supply 
would,  according  to  the  current  theory,  involve  more 
than  double  the  present  expenditure  in  production. 
The  law  of  "  diminishing  returns "  of  agriculture  be- 
comes, in  terms  of  the  formulas  here  employed,  a  law 
of  increasing  costliness  of  elementary  utilities.  It 
means,  not  that  food  will  be  scarce  and  men  hungry, 
when  the  world  is  more  densely  peopled,  but  that  the 
food  supply,  enlarged  as  it  must  and  will  be,  will  cost 
more  labor  per  capita  than  at  present. 

The  basis  of  this  accepted  principle  is  the  fact  that 
elementary  utilities  are  created  through  the  action  of 
the  vital  forces  of  the  soil,  and  that  nature  is  not  every- 
where equally  generous.  The  best  land  is  used  first, 
and  afterwards  that  which  rewards  labor  less  liberally. 
The  normal  price  of  that  which  man  wins  from  une- 
qually liberal  nature  must  rise  as  the  growth  of  popula- 
tion occasions  an  enlarged  demand  for  food,  and  as  this, 
in  turn,  compels  a  resort  to  poorer  and  poorer  soils.  More 
and  more  in  the  sweat  of  his  face  must  man  eat  his 


98  THE   LAW    OF    DEMAND   AND    SUPPLY. 

bread,  though  he  may  procure  comforts  and  intellectual 
enjoyments  with  a  constantly  lessening  effort. 

It  is  conceded  that  the  invention  of  machines,  and  the 
adoption  of  improved  processes  in  agriculture  retard  the 
operation  of  the  law  of  diminishing  returns,  and  hold  it, 
during  considerable  intervals,  completely  in  abeyance. 
It  is  conceded  that  improved  means  of  transportation 
have  a  similar  effect.  Had  the  American  continent,  in 
Ricardo's  time,  been  towed  bodily  across  the  Atlantic, 
and  anchored  with  its  shores  in  contact  with  the  British 
Islands,  the  wheat  fields  of  Dakota  would  not  have  been 
as  near  to  London,  if  distance  be  estimated  in  cost  of 
transportation,  as  they  are  to-day.  Many  a  mill,  a  half- 
century  ago,  revolved  its  wooden  wheel  in  parts  of 
England  from  which  the  grist  could  by  no  means  then 
known  be  carried  to  London  with  so  small  a  deduction 
for  expenses  by  the  way  as  can  the  present  output  of 
the  mills  of  Minnesota.  The  relief  thus  experienced 
by  the  consumers  of  flour  in  London  is  as  real  as  though 
wheat-raising  in  England  had  become  more  remunera- 
tive. Wheat,  in  the  London  market,  is  an  aggregate  of 
elementary  and  place  utilities,  and  improved  facilities 
of  transportation  have  so  cheapened  the  latter  as  to 
counterbalance  the  increased  costliness  of  the  former. 

A  counteracting  influence,  to  which  little  justice  is 
done,  is  that  of  the  accumulation  of  capital  and  the 
reduction  of  interest.  The  expenditure  of  capital 
enough  will  make  the  best  of  land  out  of  what  now 


THE  LAW  OF  DEMAND  AND  SUPPLY.       99 

ranks  as  the  poorest ;  and  if  that  capital  will  but  con- 
tent itself  with  a  sufficiently  small  proportion  of  the 
returns  of  cultivation,  the  reward  of  the  labor  itself 
may  be  as  large  as  that  now  realized  from  the  soils  in 
use.  When  a  hundred  million  dollars  are  available  for 
dredging  the  deposit  from  the  mouth  of  the  Mississippi, 
and  depositing  it  on  the  sands  of  Florida,  for  a  return 
of  one  per  cent  upon  the  investment,  it  is  conceiva- 
ble that  labor  may  win  as  much  from  the  use  of  the 
artificially  made  land  as  it  does  from  that  which  is 
not  burdened  by  the  claims  of  the  capitalist. 

It  may  be  maintained  that  all  these  influences  are 
temporary ;  that  the  principle  at  the  basis  of  the  law 
of  the  diminishing  returns  of  agriculture  is  perma- 
nent; and  that,  in  the  end,  this  tendency  must  over- 
come the  others.  The  time  may  be  remote,  but  it  is 
said  to  be  coming,  when  labor  applied  to  the  soil  must 
create  a  smaller  product  than  now  rewards  it,  and 
when  man  must  win  by  harder  and  harder  effort  the 
privilege  of  mere  existence.  It  remains,  therefore,  to 
notice  an  influence  which  is  a  chief  basis  of  economic 
optimism,  since  it  is  capable  of  holding  the  law  of 
diminishing  returns  for  an  indefinite  period  in  abey- 
ance. 

We  do  not  here  combat  that  essential  Malthusianism 
which  maintains  that  a  retarding  of  the  rate  of  increase 
of  population  is  an  ultimate  necessity,  if  humanity  is  to 
fully  enjoy  the  earth,  and  to  perfect  itself.  The  prob- 


100  THE  LAW  OF  DEMAND  AND   SUPPLY. 

able  condition  of  the  future  is  that  of  a  constantly 
increasing  population,  and  of  a  constantly  diminishing 
rate  of  increase.  These  tendencies,  acting  together, 
would  give,  at  some  point  in  the  indefinite  future,  a 
comparatively  stationary  condition,  in  which  popula- 
tion, having  become  exceedingly  dense,  would  show, 
from  decade  to  decade,  little,  if  any,  increase.  Mal- 
thusianism  of  a  certain  type  would  predict  a  reign  of 
increasing  misery  during  the  indefinitely  long  period 
before  the  stationary  condition  is  realized.  Is  there 
ground  for  such  a  belief  in  economic  law? 

The  cost  of  creating  form  utilities  is  constantly 
lessening ;  and  form  utilities  are  more  and  more  prepon- 
derating in  the  wealth  of  society.  That  which  human- 
ity, as  a  whole,  enjoys  costs  it  a  continually  lessening 
sacrifice. 

That  which  produces  form  utilities  is  not  the  crea- 
tive power  of  nature,  but  the  transforming  power  of 
men ;  and  this  power  becomes  progressively  efficient  as 
production  enlarges.  New  motive  powers,  machines, 
and  processes  are  multiplying,  and  promise  to  increase, 
beyond  any  discernible  limit,  the  capacity  of  man  to 
transform  what  nature  places  in  his  hand.  If  elemen- 
tary utilities  become  costlier  by  one-quarter,  and  form 
utilities  cheaper  by  one-half,  the  resultant  is  a  gain 
for  humanity  in  the  enjoyments  which  it  can  se- 
cure. 

A  numerical  illustration  will  place  this  principle  in  a 


THE    LAW   OF    DEMAND   AND    SUPPLY.  101 

clear  light.  Let  us  suppose  that  the  influences  which 
retard  the  action  of  the  principle  of  diminishing  re- 
turns in  agriculture  have  done  their  full  work,  and 
that  the  law  is  asserting  itself,  and  causing  a  day's 
subsistence  for  society  to  cost,  decade  after  decade,  an 
increasing  proportion  of  the  day's  labor.  Let  us  say 
that,  in  the  year  2000,  two-fifths  of  the  labor  of  soci- 
ety, as  a  producing  organism,  is  expended  in  creating 
elementary  utilities,  and  three-fifths  in  creating  form 
and  place  utilities.  Let  us  suppose  that  the  lapse  of 
a  century  reverses  this  numerical  proportion,  causing 
three-fifths  of  the  total  labor  to  be  expended  upon  the 
elementary  utilities ;  does  it  follow  that  society  gets, 
in  the  aggregate,  less  than  before  for  the  total  effort 
of  a  day  or  a  year?  Not  if  the  labor  expended  upon 
form  and  place  utilities  has  gained  in  efficiency  more 
than  other  labor  has  lost.  If  the  social  effort,  which 
is  still  available  for  the  creation  of  the  higher  utili- 
ties, has  become  twice  as  effective  as  before,  then  the 
total  labor  of  the  producing  organism  will  secure  for 
it  a  far  greater  aggregate  result.  Mankind  may  be  in- 
definitely better  off,  on  the  whole,  when  three-fifths  of 
its  total  effort  is  crudely  agricultural.  If  it  takes  ac- 
count of  stock  at  the  end  of  a  year,  estimates  its  total 
gains  and  sacrifices,  and  compares  them  with  those  re- 
corded for  a  similar  period  a  century  before,  it  will 
find  this  as  a  result :  it  has  been  fed,  as  during  the 
earlier  year,  and  it  has  been  better  served  in  every 


102  THE   LAW   OF    DEMAND    AND   SUPPLY. 

other  direction.  The  two-fifths  of  its  labor  force,  still 
available  for  the  creation  of  higher  utilities,  has  fash- 
ioned its  clothing  and  built  its  dwellings  in  a  better 
manner ;  and  it  has  instructed,  amused,  and,  in  aesthetic 
and  spiritual  ways,  ministered  to  it  far  better  than 
was  possible  in  the  days  when  a  larger  but  less  effi- 
cient force  was  expended  in  these  directions.  In  the 
terms  of  our  formulas,  the  utilizations  of  society  have 
increased,  and  the  organism  has  approached  nearer 
to  its  economic  goal.  Its  intelligence  has  triumphed 
over  resisting  nature,  and,  though  she  succeeds  in  ex- 
acting a  larger  and  larger  proportionate  effort  in  the 
production  of  crude  subsistence,  she  undergoes  from 
decade  to  decade  a  more  complete  subjugation.  She 
is  compelled  to  minister  more  and  more  subserviently 
to  the  higher  wants  of  man. 

The  law  of  diminishing  returns  in  agriculture  would, 
in  itself,  give  promise  of  a  condition  in  the  future  in 
which  food  will  be  as  plentiful  as  now,  but  in  which 
the  gaining  of  it  will  absorb  an  increased  proportion 
of  the  labor  of  the  social  organism.  The  effect  of  this 
would  be  to  lessen  the  amount  of  labor  available  for 
the  creation  of  finer  products,  and  this  diminution 
would  be  far  more  than  compensated  by  the  greater 
effectiveness  of  this  labor.  We  may,  then,  admit  the 
law  of  diminishing  returns  in  agriculture,  and  fear 
nothing  for  the  future  of  humanity.  The  basis  of 
economic  welfare  is  broadening,  and  if  this  tendency 


THE   LAW    OF   DEMAND   AND    SUPPLY.  103 

is  ever  reversed,  it  will  be  at  a  time  too  far  in  the 
future  to  be  a  subject  of  present  consideration. 

The  inaccuracies  of  thought'  in  the  orthodox  theory 
of  Demand  and  Supply  are  chiefly  of  importance  for 
their  bearing  on  the  outlook  for  the  future  of  the  race. 
It  will  be  remembered  that  Mr.  Mill's  statement  of  the 
law  divides  commodities  into  three  classes,  namely, 
those  which  cannot  be  reproduced,  those  which  can  be 
produced  in  any  quantity  at  a  uniform  cost,  and  those 
which  can  be  produced  in  enlarged  quantity,  but  only 
at  an  increasing  cost.  Articles  of  the  first  class  are  said 
to  have  no  normal  or  "  natural "  price  ;  those  of  the  sec- 
ond have  a  natural  price  which  is  uniform,  regardless 
of  the  quantity  produced ;  and  those  of  the  third  have 
a  natural  price  which  rises  with  increasing  production. 
For  commodities  the  cost  of  which  diminishes  with  in- 
creasing production  the  theory  makes  no  provision,  and 
the  omission  is  unfortunate. 

If  the  law  of  Demand  and  Supply  be  based  on  what 
labor  creates,  not  matter  but  its  utilities,  it  will  be  seen 
that  the  first  class  named  in  the  traditional  statement 
of  the  theory  can  scarcely  be  said  to  exist.  To  repro- 
duce an  article  is  to  reproduce  its  serviceable  qualities ; 
and  it  is,  perhaps,  never  the  case  that  an  article  is  of- 
fered for  sale  of  which  none  of  the  utilities  can  be 
thus  duplicated.  Where  any  of  the  major  utilities  of 
a  commodity  can  be  reproduced,  the  article  is,  in  so 
far,  subjected  to  the  ordinary  laws  of  the  market,  and 


104  THE    LAW    OF   DEMAND   AND    SUPPLY. 

its  price  is,  in  part,  determined  by  the  cost  of  repro- 
duction of  those  particular  utilities. 

It  is  obvious,  without  careful  analysis,  that  the  price 
of  rare  articles  is  greatly  influenced  by  the  possibility 
of  producing  substitutes  for  them.  To  multiply  ap- 
proximate reproductions  of  a  rare  painting  is  to  lessen 
the  intensity  of  the  competition  for  the  painting 
itself.  A  Cremona  violin  of  a  given  age  sells  for  less 
than  it  would  command  if  other  violins  of  nearly 
equal  quality  could  not  be  manufactured.  The  price 
of  the  rare  instrument  consists  of  two  distinguishable 
parts,  first,  the  market  price  of  fine  violins,  as  gov- 
erned by  the  cost  of  production,  and,  secondly,  a 
special  premium  for  the  unique  excellence  of  the  old 
instrument. 

Accurately  stated,  the  law  is  this :  a  few  commodities 
contain  certain  utilities  which  cannot  be  duplicated, 
and  others  which  can  be  so;  the  former  command  a 
price  determined  by  the  direct  action  of  demand  and 
supply,  and  the  latter  tend  to  sell  at  a  normal  rate, 
fixed  by  the  cost  of  reproduction.  The  market  price  of 
such  commodities  is  the  aggregate  price  of  their  differ- 
ent utilities.  Mr.  Mill's  own  illustrations  prove  this 
principle.  Rare  wines  contain  properties  peculiar  to 
themselves,  and  others  which  are  common  to  a  wide 
range  of  similar  products.  The  value  of  the  Johannis- 
berger  vintage  consists  of  the  market  value  of  an  equal 
quantity  of  other  fine  wine,  plus  a  premium  for  its  own 


THE   LAW    OF    DEMAND    AND   SUPPLY.  105 

inimitable  flavor.  The  price  of  antique  statues,  when 
they  fall  into  the  market,  is  somewhat  affected  by  the 
value  of  substitutes  which  may  be  multiplied  at  will; 
and  the  same  is  true  of  all  the  articles  enumerated. 

If  there  are  commodities  of  which  the  supply  may 
be  increased  indefinitely  at  a  uniform  rate  of  cost,  it  is 
because  the  cheapening  of  the  form  utilities  embodied 
in  them  chances  to  exactly  counterbalance  the  growing 
costliness  of  the  elementary.  A  fine  watch  consists 
mainly  of  elementary  utilities,  in  the  case,  and  of  form 
utilities,  in  the  movement.  If  the  consumption  of 
watches  were  to  be  quadrupled,  it  might  happen  that 
the  greater  costliness  of  the  one  part  would  offset  the 
greater  cheapness  of  the  other.  The  second  of  the 
traditional  classes  may  have  a  fortuitous  and  transient 
existence. 

The  third  class  has  a  somewhat  better  basis.  If  the 
law  of  diminishing  returns  in  agriculture  were  ad- 
mitted, it  would  be  necessary  to  accept  the  conclusion 
that  crude  nutriment  will  become  costlier  as  population 
increases.  It  would  then  be  of  importance  to  note 
that  there  is  a  class  not  noticed  in  the  traditional  the- 
ory in  the  case  of  which  the  reverse  of  the  above  law 
is  true.  Commodities  consisting  mainly  of  form  util- 
ities are  unquestionably  becoming  cheaper ;  and  among 
these  are  all  products  which  minister  to  intellectual, 
aesthetic  and  spiritual  wants.  If  the  conditions  of  the 
future  were  to  involve  plainer  living,  they  would  at 


106  THE   LAW   OF   DEMAND    AND   SUPPLY. 

least  be  more  favorable  to  high  thinking ;  and  we 
might  welcome  a  tendency  which  would  make  it  neces- 
sary for  men  to  forego  some  of  the  sensuous  enjoy- 
ments of  life,  if  it,  at  the  same  time,  enriched  them  in 
intelligence,  refinement  and  moral  character.  If  the 
man  of  the  future  is  to  be  wiser  and  better  than  the 
man  of  to-day,  we  need  not  be  troubled  with  the  ques- 
tion whether  he  will  or  will  not  be  'happier.  We  do 
not  admit,  however,  that  the  spiritual  gain  is  to  be 
purchased  by  a  physical  sacrifice.  The  world  is,  in 
fact,  becoming  more  tolerable  to  man  as  an  animal,  and 
it  is  becoming  indefinitely  more  favorable  to  him  as  a 
rational  being. 


CHAPTER  VII. 

THE   LAW    OF   DISTRIBUTION. 

THAT  mankind  as  a  whole  shall  become  richer  does 
not,  of  necessity,  involve  an  increase  of  human  wel- 
fare. That  is  dependent,  not  only  on  the  quantity  of 
wealth  accumulated,  but  on  the  mode  in  which  it  is 
shared.  A  better  division  of  the  results  of  industry 
might  atone  for  some  diminution  in  the  amount  pro- 
duced. 'As  bearing  on  the  prospects  of  mankind,  there 
are  three  practical  problems  to  be  solved ;  of  these  the 
first  is  how  to  create,  with  the  least  sacrifice,  the 
largest  aggregate  of  utilities;  the  second  is  how  to 
justly  divide  the  gain  ;  and  the  third  is  how  to  ensure 
in  the  product  that  quality  which  shall  cause  it  to 
minister  to  permanent  rather  than  to  transient  well- 
being.  We  are  now  to  consider  the  second  of  these 
problems.  The  quantity  of  wealth  created  is,  in  fact, 
increasing  faster  than  population ;  are  the  equities  of 
distribution  also  increasing  ? 

The  mode  of  dividing  the  proceeds  of  social  industry 
is  changing,  under  our  eyes,  at  a  rate  so  rapid  that  it 
is  difficult  for  a  scientific  system  to  keep  pace  with 
it.  Demand  and  supply  are  the  regular  agents  of 
distribution,  and  have  divided  the  stream  of  social 


108  THE   LAW   OF   DISTRIBUTION. 

production  into  three  channels,  containing  respectively 
Rent,  Gross  Profits,  and  Wages.  Of  these,  the  first 
has  been  traditionally  regarded  as  determined  by  a 
more  or  less  independent  law ,  and  it  will  be  conven- 
ient for  our  purposes  to  accept  this  theory,  and  con- 
fine our  attention  to  the  division  which  determines 
the  amount  of  wages  and  of  profits. 

Vital  as  are  the  interests  centering  in  the  law  of 
wages,  the  subject  is  full  of  unsettled  theoretical 
questions  of  a  kind  that,  as  one  would  suppose,  ought 
to  be  forever  decided  by  a  little  clear  and  candid 
thought.  There  is,  moreover,  a  moral  element  in 
these  questions.  Points  of  fact  suggest  problems  in 
equity.  What  are  wages?  From  what  source  do 
they  come?  What  determines  their  amount?  These 
questions  suggest  the  inquiry  whether,  in  nature, 
source,  and  amount,  they  are  what  they  ought  to  be, 
or  whether  there  is,  in  the  present  transactions  of 
class  with  class,  a  series  of  wrongs  which  demand  a 
reform,  and,  as  an  alternative,  threaten  a  revolution. 

In  the  absence  of  a  scientific  answer  to  the  points 
of  equity  at  issue,  and  of  one  so  clearly  proven  as  to 
compel  belief,  interest  dictates  the  replies  given  in 
the  greater  number  of  cases ;  and  this  fact  arrays  one 
social  class  against  another,  and  makes  it  possible  for 
each  to  claim  a  moral  basis  for  its  action.  The  con- 
tests of  interest  between  capitalists  and  laborers  are 
intensified  by  counter-claims  in  equity ;  and  the  prob- 


THE   LAW   OF   DISTRIBUTION.  109 

lem  thrust  upon  society  is  not  merely  how  to  divide 
a  sum,  but  how  to  adjust  rights  and  obligations. 

Politics  cannot  escape  the  dominant  influence  of 
these  ethico-economic  issues.  The  solidarity  of  capi- 
tal on  the  one  hand,  and  of  labor  on  the  other,  are 
things  of  which  the  founders  of  our  republic  thought  as 
little  as  the  founders  of  our  system  of  economics. 
The  strain  to  which  this  influence  is  about  to  subject 
our  institutions  would  be  indefinitely  less  if  the  counter- 
claims in  equity  could  be  in  so  far  settled  that  men 
not  biased  by  belligerent  feeling  might  be  in  substan- 
tial agreement  concerning  them.  If  it  is  humanly 
possible  to  thus  settle  the  questions  at  the  basis  of  the 
law  of  wages,  no  scientific  work  can  be  more  immedi- 
ately and  widely  beneficent.  These  questions  tend, 
if  rightly  answered,  to  public  order;  if  wrongly  an- 
swered, to  communism ;  and,  if  unanswered,  to  agita- 
tion and  peril. 

The  very  allusions  to  the  solidarity  of  labor  and 
of  capital  which  it  has  been  necessary  to  make,  may 
seem  to  have  placed  out  of  order  any  farther  discus- 
sion of  the  accepted  law  of  demand  and  supply.  That 
has  been  supposed  to  rest  on  the  antecedent  fact  of 
free  competition,  to  which  solidarity  is  the  antithesis. 
If  labor,  on  the  one  hand,  and  capital,  en  the  other, 
should  ever  act  as  units  in  the  dividing  of  the  prod- 
uct of  their  industrial  action,  true  competition  would 
be  totally  suppressed.  Such  a  condition  is  one  im- 


110  THE  LAW   OP  DISTRIBUTION. 

possible  extreme,  while  the  other  is  the  condition  of 
unhindered  competition  which  crude  thinking  has 
placed  at  the  basis  of  economic  law.  The  facts  of 
actual  industry  are  between  the  extremes,  and  a  theory 
of  Distribution  must  conform  to  the  facts. 

Free  competition  itself  is,  as  we  shall  later  see,  not 
an  unrestricted  scramble  for  gain.  Of  these  two  pro- 
cesses the  former  has  recently  existed,  and  in  certain 
fields  still  exists,  while  the  latter  is  so  completely 
antiquated  that  the  most  we  have  to  do  with  it  is  to 
show  its  monstrosity.  The  only  possible  mode  of 
attaining  a  true  law  of  distribution  is  to  ascertain  how 
demand  and  supply  would  operate  under  a  regime  of 
competition  in  the  true  sense  free,  and,  secondly,  how 
that  action  is  modified  by  the  growth  of  what,  in  the 
absence  of  an  authorized  term,  I  should  like  to  call 
solidarism,  or  the  tendency  of  both  labor  and  capital 
to  aggregate,  and  act,  within  extensive  fields,  as  units. 
There  is,  indeed,  no  prospect  that  competition  will  ever 
be  totally  suppressed;  in  spite  of  all  encroachments  on 
its  territory  it  will  doubtless  have  a  residual  field  of 
action  in  permanent  possession. 

Nothing  is  more  confusing  than  the  view  which  rep- 
resents demand  and  supply  as  acting  promiscuously 
on  everything  bought  and  sold.  This  view  implies  a 
general  receptacle  termed  a  market,  into  which  com- 
modities are  indiscriminately  thrown,  and  in  which,  in 
some  way,  they  receive  a  valuation.  In  this  theory  of 


THE  LAW    OF  DISTRIBUTION.  Ill 

the  market  and  its  action  labor  is  usually  classed  as  a 
commodity,  the  price  of  which  is  fixed  in  the  same 
manner  as  that  of  other  articles  in  the  promiscuous 
assortment. 

The  action  of  demand  and  supply  is  systematic  and 
capable  of  clear  analysis.  It  proceeds  in  one  way  in 
the  case  of  products  ready  for  social  consumption,  in 
another  in  the  case  of  the  specific  utilities  which 
workers  in  the  producing  series  impart,  and  in  still 
another  in  the  case  of  the  shares  of  capitalists  and 
laborers  who  jointly  create  a  particular  utility.  To 
fix  the  value  of  clothing  ready  for  use  is  one  thing; 
to  divide  that  value  among  agriculturists,  transporters, 
manufacturers  and  tailors,  is  another;  and  to  adjust 
the  proportions  falling  to  capitalists  and  to  laborers  in 
each  of  these  producing  groups  is  still  another.  The 
entire  distributing  process  consists  of  a  division,  a  sub- 
division and  a  farther  subdivision  of  the  general  prod- 
uct of  social  industry.  Demand  and  supply  have  a 
primary,  a  secondary  and  a  tertiary  field  of  action. 

Social  production  takes  place,  as  already  noticed,  not 
by  a  single  operation,  but  by  a  succession  of  many. 
One  producing  agency  begins  with  crude  nature,  and 
so  modifies  it  as  but  partially  to  prepare  it  for  render- 
ing its  service  to  men  ;  another  and  another  continue  the 
operation.  The  ultimate  result  of  the  action  of  all  is 
a  completed  product,  and  the  particular  change  effected 
by  each  may  be  distinguished  as  a  sub-product.  The 


112 


THE   LAW   OF  DISTRIBUTION. 


elementary  utility  created  by  mining  is  the  first  sub- 
product  of  a  certain  series ;  the  place  utility  imparted 
by  transportation  is  a  second;  the  form  utility  result- 
ing from  smelting  is  a  third ;  that  from  puddling  and 
rolling  is  a  fourth  ;  that  from  cutting  is  a  fifth ;  while 
the  aggregate  of  all  is  the  keg  of  nails  of  our  former 
illustration. 

In  the  order  of  production  the  series  stands  as  fol- 
lows :  — 

SYNTHESIS  RESULTING  IN  THE  COMPLETED  PRODUCT,  NAILS. 


1st  Sub-Product. 

Elementary  Utility. 
Ore. 

Resulting  from  the  joint 
action  of 
Capital  and  Labor. 

3d   Sub-P. 

Place  U. 
Transporta'n. 

Joint  result  of 
C'  and  L'. 

3d   Sub-P. 

Form  U. 
Smelting. 

Joint  result  of 
C"  and  L". 

4th  Sub-P. 

Form  U. 
Puddling,  etc. 

Joint  result  of 
C"'  and  L"'. 

5th  Sub-P. 

Form  U. 
Cutting. 

Joint  result  of 
C""  and  L"". 

The  first  sub-product  is  an  elementary  utility  created 
by  capital  and  labor;  the  second  is  a  place  utility  cre- 
ated by  another  kind  of  capital  and  labor ;  the  third, 
fourth  and  fifth  are  specific  form  utilities,  each  created 
by  its  own  variety  of  capital  and  labor.  The  com- 
plete product,  nails,  is  the  outcome  of  the  application 
of  C,  C',  C",  C'"  and  C"",  and  of  L,  L',  L",  L'"  and 
L"" ;  it  is  the  resultant  of  five  specific  kinds  of  effort, 
each  assisted  by  the  form  of  capital  adapted  to  it. 
Social  production  is,  thus,  a  synthesis  of  clearly  distin- 
guishable elements. 

Distribution  is  the  reverse  of  this  synthesis ;  it  is  an 
analytical  process  which  resolves  the  above  aggregate 


THE  LAW   OF  DISTRIBUTION.  113 

into  its  components.  It  deals,  however,  with  pure 
quantity;  it  separates,  not  commodities  into  their 
component  utilities,  but  values  into  a  series  of  quan- 
titative increments.  It  determines  the  amount  of 
social  wealth  embodied  in  a  quantity  of  nails ;  it  then 
fixes  the  proportion  of  that  sum  represented  by  each  of 
the  sub-products  which  constitute  the  nails,  and,  again, 
the  proportion  of  each  of  these  latter  amounts  which 
belongs  to  capital  and  to  labor.  In  terms  of  our 
diagram,  distribution  determines  the  value  of  the  Com- 
pleted Product,  resolves  that  amount  into  the  values 
of  1st  sub-P.  2d  sub-P.  etc.,  and  then  subdivides  the 
value  of  1st  sub-P.  between  C  and  L,  that  of  2d  sub- 
P.  between  C'  and  L',  etc. 

The  steps  of  the  actual  distribution  follow,  in  time, 
the  order  of  production,  which  is  the  reverse  of  the 
logical  order  of  division.  The  secondary  subdivision  is 
made,  in  reality,  first.  The  first  sub-product  is  dis- 
tributed among  capitalists  and  laborers  before  the 
amount  of  that  sub-product  is  fixed  by  an  actual  sale. 
The  mining  company  must  usually  pay  its  men  before 
actually  parting  with  its  ore.  It  proceeds  thus  with 
but  little  risk,  since  the  value  of  the  ore  is  sufficiently 
gauged  by  current  sales  by  other  ore  producers.  In 
like  manner  the  value  of  the  sub-products  is,  in  each 
case,  determined  before  that  of  the  completed  product  is 
actually  fixed  by  a  final  sale.  Ore,  pig  iron,  bar  iron, 
etc.,  are  sold  before  the  particular  nails  which  embody 


114  THE  LAW   OF  DISTRIBUTION. 

the  value  of  all  are  placed  upon  the  market.  The  valut* 
of  the  nails  is,  in  the  meanwhile,  sufficiently  gauged  by 
other  sales  of  that  commodity. 

The  final  sale  of  the  completed  product  is,  in  reality, 
a  dividing  process.  It  is  a  quantitative  division  of  the 
general  product  of  the  industrial  organism.  That  which 
fixes  the  purchasing  power  of  nails  assigns  to  the  nail- 
producing  group  its  quantitative  proportion  of  the  total 
utilities  resulting  from  industry.  Society  is  here  to  be 
regarded  as  the  purchaser ;  the  sellers  are  the  creators 
of  the  last  sub-product  in  the  series ;  and  the  parties  in 
the  division  effected  by  the  sale  are  the  nail-producing 
group,  on  the  one  hand,  and  all  other  groups,  on  the 
other.  The  fate  of  the  whole  group  is  thus,  in  a  sense, 
intrusted  to  the  creators  of  the  last  utility  in  the  series, 
who,  by  the  nature  of  the  arrangement,  must  act  as  sell- 
ing agents. 

The  earlier  sub-producers  have  received  their  aggre- 
gate share  of  the  product  by  the  sale  of  bar  iron  to  the 
nail-cutters ;  the  still  earlier  ones  have  obtained  theirs 
in  the  sale  of  pig  iron,  etc.  Each  of  the  earlier  sales  in 
the  series  effects  a  division  between  the  groups  of  pro- 
ducers whose  work  has  preceded  the  sale,  and  those 
whose  work  is  to  follow  it. 

The  reward  of  each  particular  producing  group  is  de- 
termined by  the  buying  of  the  antecedent  sub-products, 
and  the  subsequent  selling  of  them  with  the  addition  of 
another  utility.  The  nail-maker  buys  material,  trans- 


THE   LAW   OF   DISTRIBUTION.  115 

forms  and  sells  it ;  and  his  product,  quantitatively  con- 
sidered, is  the  difference  in  the  measure  of  the  utility 
of  the  article,  which  is  caused  by  the  transformation. 
He  converts  that  value  into  currency  by  buying  bars 
and  selling  nails. 

The  process  which  divides  a  sub-product,  quantita- 
tively considered,  between  capitalists  and  laborers  differs 
in  principle  from  the  more  general  divisions,  and  de- 
mands fuller  consideration.  In  the  meanwhile  we  need 
to  examine  the  mode  in  which  demand  and  supply 
operate,  as  adjusting  agents,  in  affecting  the  primary 
and  secondary  divisions.  Let  us,  for  simplicity,  take 
an  ideal  case,  and  make  a  tabular  representation  of  the 
conditions  presented.  Let  an  insular  society,  discon- 
nected from  the  commercial  world,  be  supposed  to 
contain  a  thousand  wool-growers,  twenty  wool-buyers, 
fifty  manufacturers  of  woolen  goods,  and  five  hundred 
merchant-tailors.  The  series  may  be  represented  as 
follows :  — 


500  Tailors,  and  Employes. 
50  Manufacturers,  and  Operatives. 
20  Wool-buyers,  and  Assistants. 
1000  Wool-growers,  and  Employes. 


The  total  product  of  the  labor  of  all  is  the  clothing 
of  the  men  of  the  island.  The  society  contains  many 
other  groups,  each  having,  as  the  result  of  its  industry, 
a  particular  product,  sufficient,  in  quantity,  for  the 


116  THE  LAW   OF    DISTRIBUTION. 

wants  of  all  inhabitants.  The  conditions  are,  of  course, 
simplified  out  of  all  detailed  resemblance  to  the  facts  of 
life,  and  yet  present,  with  the  greater  clearness,  the  one 
great  fact  of  actual  social  economy  which  crude  think- 
ing disregards,  to  its  utter  confusion,  that,  namely,  of 
certain  necessary  and  permanent  limits  of  competitive 
action.  The  formal  modification  of  the  above  table 
which,  in  a  completer  discussion,  it  would  be  most  nec- 
essary to  make,  is  that  which  would  express  the  relation 
of  producers  of  the  cruder  materials  to  several  groups 
of  producers  of  the  finer  utilities.  One  man  may  be- 
long to  several  such  groups  as  those  in  our  table.  A 
farmer  may  raise  corn  as  well  as  keep  sheep,  and  may 
thus  be  a  member  of  the  group  which  feeds  the  insular 
community,  as  well  as  to  that  which  clothes  it.  He 
works  in  two  capacities  and  receives  a  specific  reward 
in  each.  In  like  manner  the  wool-buyer  may  sell  his 
product  to  carpet-makers,  as  well  as  to  makers  of  cloth, 
and  so  belong,  in  so  far  as  a  part  of  his  effort  is  con- 
cerned, to  a  group  which  provides  a  variety  of  house 
furnishings.  The  horizontal  lines  including  classes  of 
sub-producers  need,  for  a  nearer  resemblance  to  the 
complex  system  of  social  industry,  to  be  prolonged 
through  other  general  groups.  This  complication  may 
be  studied  at  will;  it  does  not  affect  one  primarily 
important  conclusion  to  which  a  study  of  the  simpler 
grouping  would  lead  us,  namely,  that  all  true  competi- 
tion is  between  similar  sub-producers.  Resolving  the 


THE  LAW   OF  DISTKIBUTION.  117 

complex  process  popularly  termed  competition  into  the 
elements  of  which,  in  an  earlier  chapter,  we  have  found 
that  it  is  composed,  we  now  see  that  the  part  which  is 
truly  competitive,  the  rivalry  in  under-selling,  is  con- 
fined, in  every  case,  between  two  adjacent  horizontal 
lines;  while  the  bargaining  process  takes  place  across  a 
line.  The  fifty  manufacturers  compete  only  with  each 
other ;  they  buy  across  the  line  which  separates  them 
from  wool-dealers,  and  sell  across  that  which  separates 
them  from  tailors. 

The  group  which  makes  clothing  for  our  ideal  so- 
ciety contains  1,570  specific  producing  agencies,  each 
having  its  employe's.  Wool-growers  and  wool-buyers 
have  some  hired  men ;  manufacturers  have  many,  and 
tailors  have  their  necessary  quota.  There  may  be 
15,000  capitalists  and  laborers  in  the  general  group 
which  produces  the  clothing  of  a  hundred  thousand 
persons.  If  the  groups  were  completely  distinct,  and  if 
the  consumption  of  clothing  were  per  capita,  eighty- 
five  per  cent  of  the  product  of  this  group  would  be  a 
surplus. 

It  is  a  matter  of  course  that  the  disposable  part 
of  the  product  of  this  group  must,  in  the  general 
exchanges  of  society,  purchase  what  its  members  use 
of  the  surplus  products  of  all  other  groups.  Our 
15,000  persons  get  food,  dwellings,  furnishings,  books, 
etc.,  by  selling  all  the  clothing  which  they  do  not 
use ;  and  every  other  group  acts  in  like  manner.  This 


118  THE   LAW    OF   DISTRIBUTION. 

is  one  primary  fact  in  distribution;  but,  in  itself,  it 
fixes  the  price  of  no  specific  product  in  terms  of  any 
other. 

It  will  be  remembered  that,  in  the  traditional  eco- 
nomic science,  this  principle  that  surplusses  offset  each 
other,  has  been  applied  to  international  trade.  With 
certain  allowances  for  debts,  exports  pay  for  imports; 
and  this  fact  is  of  importance  as  bearing  on  the  move- 
ments of  currency.  Yet,  as  affecting  the  distribution 
of  wealth,  national  lines  are  not  of  primary  conse- 
quence. With  due  allowance  for  debts  and  taxes, 
it  is  true  of  any  local  division  whatever  that  what 
goes  out  of  it  pays  for  what  comes  into  it.  This  is 
true  of  a  county,  a  township,  or  a  farm ;  that  which 
crosses  the  boundary  of  either  one  of  these  divisions  in 
an  outward  direction  pays  for  what  crosses  it  in  an 
inward  direction.  This  fact  would  be  worth  mention- 
ing if  counties,  townships,  and  farms  coined  money, 
and  troubled  themselves  about  the  balance  of  trade; 
in  discussing  the  distribution  of  wealth,  it  is  not  worth 
mentioning.  The  outcome  of  the  industry  of  the  world 
is  not  divided  among  states,  counties,  townships,  and 
farms;  but  among  producing  groups  and  sub-groups, 
and  then  among  the  capitalists  and  laborers  in  each. 

Competition  follows  necessarily  and  permanently  the 
lines  indicated  in  our  diagram.  These  demarcations 
are  made  by  the  nature  of  the  functions  of  the  groups 
thus  described.  These  non-competing  groups  are 


THE  LAW    OF  DISTRIBUTION.  119 

totally  distinct  from  those  discussed  by  Professor 
Cairnes,  which  are  based  on  the  personal  qualities  of 
laborers.  Of  these  we  shall  speak  later ;  their  impor- 
tance in  the  process  of  distribution  lies  in  the  fact 
that  a  laborer  cannot  easily  transfer  himself  from  one 
class  to  another.  In  the  grouping  represented  in  our 
diagram  we  take  no  account  of  personnel.  For  aught 
that  we  now  know  or  care,  men  may  pass  from  group 
to  group,  —  and  from  generation  to  generation  it  is 
certain  that  the  membership  must  change,  —  yet, 
through  all  personal  changes  the  group  itself  continues 
a  distinct  thing,  separated  from  every  other  by  the 
nature  of  its  function. 

It  is  true,  in  practice,  that  migration  from  group  to 
group  is  not  altogether  easy,  and  this  fact  bears,  in 
a  manner  later  to  be  considered,  on  the  law  of  wages ; 
yet,  while  a  man  is  in  a  particular  group,  the  limits 
of  the  competition  in  which  he  takes  part  are  fixed 
by  this  fact.  The  nail-maker  of  to-day  can  compete 
only  with  nail-makers ;  and  though  he  were  able  to 
become  a  tailor  to-morrow,  he  would,  in  the  new  posi- 
tion, find  equally  sharp  boundaries  drawn  about  his 
competitive  action. 

The  primary  field  in  which  the  rivalry  in  under- 
selling takes  place  is  in  the  sale  of  completed  products 
to  society;  the  secondary  field  is  in  the  sale  of  the 
sub-products  to  classes  in  the  producing  groups;  and 
the  ternary  field  is  in  the  transactions  which  adjust 
wages  and  profits  within  the  sub-groups. 


120  THE  LAW   OF   DISTRIBUTION. 

In  each  of  these  provinces  of  action  there  may  exist 
three  more  or  less  distinct  conditions  in  respect  to 
competition.  There  may  be,  first,  the  conservative 
competition  in  which  economists  of  a  few  years  ago 
were  able  to  see  realized  a  general  harmony  of  social 
interests.  There  may  be,  secondly,  the  fiercer  contest 
in  which  eventual  success  comes  to  a  participant 
through  the  extermination  of  rivals,  the  process  well 
named  "  cut-throat "  competition.  There  may  be, 
thirdly,  a  combination  of  parties  in  the  strife,  which 
produces  a  monopoly,  tempered,  as  we  shall  hereafter 
see,  by  a  certain  latent  competition.  The  first  two 
conditions  would  seem  to  shade  into  one  another  by 
easy  gradations,  while  the  second  and  the  third  would 
appear  to  be  the  antitheses  of  each  other.  The  com- 
petitive struggle  might,  seemingly,  progress  in  fierce- 
ness from  a  rivalry  conducted  on  a  live-and-let-live 
principle  to  a  war  of  extermination ;  while  between 
such  a  war  and  the  combination  which  excludes  all 
strife  there  would  appear  to  be  nothing  in  common. 
Yet  the  first  process  is  the  result  of  a  distinct  set  of 
industrial  conditions,  while  the  second  and  third  are 
the  product  of  another  set.  Easy  and  tolerant  com- 
petition is  the  antithesis  of  monopoly;  the  cut-throat 
process  is  the  father  of  it. 

At  the  time  when  economic  science  was  in  process 
of  formulating,  the  functions  of  manufacturer  and  of 
merchant  were  merged  in  a  large  number  of  produc- 


THE   LAW    OF   DISTRIBUTION.  121 

tive  groups.  The  word  "  shop,"  as  signifying  a  place 
for  retail  dealing,  is,  in  itself,  a  record  of  a  compara- 
tively primitive,  industrial  system  in  which  manu- 
factures were  conducted  in  a  multitude  of  little  shops, 
whose  owners  often  retailed  their  products.  Large 
remnants  of  this  system  exist  in  every  European  coun- 
try ;  but  in  America  it  is  a  thing  of  the  past. 

The  era  of  manufacturing  by  hand  for  local  con- 
stituencies was  an  era  of  conservative  competition. 
Custom  played  here  the  part  ascribed  to  it  by  Mr. 
Mill,  as  a  restraining  agency  in  the  struggle ;  but  that 
custom  itself  had  a  basis  in  a  moral  sentiment,  and  in 
the  conditions  of  traffic  which  afforded  to  this  moral 
force  a  free  field  of  action. 

In  retail  dealing,  even  in  our  own  time  and  country, 
competition  is  far  more  conservative  than  in  most 
industrial  fields ;  yet  the  pressure  in  the  direction  of 
destructive  competition  in  this  department  is  indefi- 
nitely stronger  than  before  the  general  introduction 
of  machinery  into  manufactures.  It  is  only  large  sales 
that  can  atone  for  small  profits ;  and  the  artizan  retailer 
of  former  times  was  debarred  in  two  ways  from  secur- 
ing such  sales  by  means  of  a  reduction  in  prices.  He 
could  less  easily  increase  his  product  than  a  modern 
retailer  can  do ;  and,  secondly,  though  he  were  to 
increase  the  amount  produced,  he  had  no  assurance 
of  increasing  the  quantity  which  he  might  sell.  An 
increase  in  the  product  of  the  little  shop  involved 


122  THE   LAW   OF   DISTRIBUTION. 

more  laborers  and  larger  capital.  The  spirit  of  the 
time  regarded  with  distrust  an  attempt  of  one  dealer 
to  injure  his  rivals  by  selling  for  less  than  a  normal 
profit.  The  "good  will"  of  a  business  was  then  no 
misnomer,  but  signified  the  personal  confidence  and 
kindly  feeling  existing  between  a  dealer  and  his  local 
constituency.  He,  perhaps,  lived  and  worked  where 
his  ancestors  had  lived  and  worked  before  him,  and 
appeared  to  inherit  a  prescriptive  right  to  his  cus- 
tomers' patronage. 

The  conservative  competition  in  the  sale  of  finished 
products  to  society  transmitted  itself  through  the 
industrial  groups,  and  produced  an  equally  tolerant 
relation  among  rival  sub-producers.  The  man  who 
sold  material  to  the  small  artificer  was,  like  his  patron, 
debarred  from  great  increase  in  production,  and  from 
great  opportunity  for  large  sales.  Custom,  based  on 
good  will  arid  a  sense  of  prescriptive  right,  governed, 
to  a  large  extent,  the  sales  which  took  place  across  the 
horizontal  lines  separating  one  producing  class  from 
another,  and  made  the  entire  action  of  competition,  in 
its  primary  and  secondary  fields,  moderate  and  tolerant. 
The  era  was  one  of  uneconomical  methods  of  work,  of 
divided  and  localized  production,  of  large  profits  and 
small  sales,  of  high  prices  to  society  as  a  consumer,  of 
little  general  wealth,  but  of  comparative  equality  and 
contentment  among  the  middle  class  in  the  community. 

What  these  conditions  involved  for  the  working  class 


THE  LAW    OF   DISTRIBUTION.  123 

we  shall  later  see ;  in  the  meanwhile  we  need  to  notice 
the  change  in  the  action  of  competition,  in  its  primary 
and  secondary  fields,  which  resulted  from  the  introduc- 
tion of  machinery  and  the  factory  system.  The  con- 
servative influences  in  the  market  for  completed  prod- 
ucts were  largely  thrust  aside  by  the  changes  follow- 
ing the  use  of  steam,  and  a  revolution  took  place  in 
each  of  three  distinct  spheres,  namely,  in  working 
processes,  in  class  relations,  and  in  the  ethics  of  the 
market. 

The  first  effect  of  the  industrial  change  was  the  ex- 
termination of  the  general  class  of  artisan  retailers. 
The  survivors  of  the  guild-brethren  whose  shuttles 
wrought  all  fine  fabrics  for  our  ancestors  are  now 
crowded  into  a  few  fields  where  hand  work  is  prized 
for  its  own  sake.  The  utility  of  hand-worked  laces  and 
embroideries,  as  badges  of  social  caste,  still  insures 
their  production  on  a  limited  scale.  Handicraftsmen 
hold,  mainly  under  the  protection  of  fashion,  a  few 
other  fields  in  precarious  tenure. 

The  method  by  which  the  machine  has,  in  many 
cases,  displaced  the  artisan  has  been  by  appealing  to 
his  own  interest  as  a  retailer ;  it  is  by  offering  to  him, 
in  his  capacity  of  shopkeeper,  goods  for  less  than  they 
would  cost  him  as  an  artificer.  The  machine,  the 
ejiemy  of  the  tradesman  in  one  of  his  capacities,  is  his 
friend  in  another.  An  illustration  of  this  process  may 
still  occasionally  be  seen.  The  making  of  harnesses  is 


124  THE   LAW    OF    DISTRIBUTION. 

not  a  process  in  which  factory  work  has  a  relatively 
large  advantage,  and  the  local  tradesman  may  still 
make  and  retail  them;  yet  he  can  usually  buy  them  for 
less  than  it  costs  him  to  manufacture  them,  and,  except 
where  an  extra  price  is  obtainable,  on  the  ground  of 
durability,  he  is  compelled  by  self-interest  to  allow  his 
own  work  to  be  driven  from  the  field. 

The  mere  retailer  is  able  easily  to  increase  his  pro- 
duct ;  and,  in  increasing,  he  cheapens  it,  by  the  prin- 
ciple which  accords  the  larger  trade  discount  to  the 
larger  purchaser.  If  he  can  but  increase  his  sales,  he 
may  lower  his  prices,  to  the  extent  of  his  larger  dis- 
counts, without  decreasing  his  rate  of  profit ;  but  he 
may  also  decrease  his  percentage  of  profit  without 
diminution  of  his  absolute  gains.  Large  purchases 
lower  the  cost  of  goods,  and  large  sales  more  than 
atone  for  a  smaller  percentage  of  profit.  Can  the  large 
sales  be  secured  ?  Does  the  factory  system  change 
the  attitude  of  a  local  constituency  towards  a  retailer  ? 

It  is  the  man  who  makes  a  commodity,  rather  than 
the  man  who  buys  and  sells  it,  who  appears  to  a  com- 
munity to  have  a  prescriptive  right  to  patronage ;  and 
the  strong  sentiment  of  good  will,  which  protected  the 
artisan  in  his  shop  does  not  protect  the  retailer,  who 
appears,  to  popular  eye,  to  be  a  middle-man  intercepting 
the  profits  of  others.  Mere  interest  comes  more  and 
more  to  determine  where  the  public  will  buy  its  goods, 
and  this  fact  gives  a  farther  impetus  to  competition  in 


THE  LAW  OF  DISTRIBUTION.  125 

the  retail  traffic.  This  transmits  itself  in  intensified 
form  to  the  lower  sub-groups  in  the  series.  The  retailer, 
under  pressure  of  competition  from  men  of  his  own 
class,  has  no  choice  but  to  buy  where  he  can  buy  the 
cheapest,  and  competition  of  the  most  intense  kind 
arises  at  the  very  point  where,  by  the  old  system  of 
local  manufacture,  it  was  excluded,  namely,  in  the 
transactions  between  the  maker  and  the  vendor  of  com- 
modities. Rapid  centralization  follows  this  intense 
competition ;  productive  establishments  become  few, 
large  and  ready  for  the  next  transition,  that,  namely, 
to  a  regime  of  association  and  monopoly.  The  changes 
in  working  methods  that  must  follow  the  use  of  steam 
were  dimly  foreseen  by  early  inventors ;  the  ulterior 
effects  of  it  are  not  yet  appreciated.  The  revolution 
which  was  brewing  in  Watt's  tea-kettle  was  threefold, 
affecting  the  structure  of  society  and  the  moral  nature 
of  man. 

NOTE.  —  There  is,  of  course,  a  serious  incompleteness  in  any  dis- 
cussion of  Distribution  which  does  not  consider  the  Law  of  Rent. 
The  products  of  which  we  have  spoken,  as  divided  between  capital- 
ists and  laborers,  must,  if  the  traditional  theory  of  rent  be  tacitly 
accepted,  be  regarded  as  consisting  of  what  remains  to  the  produc- 
ing classes  after  rent  has  been  paid.  The  traditional  theory 
enables  us  to  take  this  view ;  it  teaches  that  rent  is  the  first  deduc- 
tion made  from  the  gross  returns  of  industry,  and  that  it  is 
determined,  in  amount,  by  an  independent  law.  This  is  not  my 
real  reason  for  omitting  the  discussion  of  it.  The  Ricardian  Law 
of  Rent  appears  to  me  to  require  an  extensive  supplementing,  which, 
for  the  purposes  of  the  present  work,  it  is  better  not  to  attempt. 


CHAPTER  VIII. 

WAGES  AS   AFFECTED   BY  COMBINATIONS. 

CERTAIN  opponents  of  Mr.  Henry  George  have 
committed  the  strategic  error  of  attacking  his  system 
at  an  impregnable  point,  namely,  his  theory  of  the 
origin  of  wages.  In  the  third  chapter  of  "Progress 
and  Poverty "  he  has  proved  that  they  come,  not 
from  capital,  but  from  products.  He  has,  indeed, 
fallen  into  an  error  greater  than  thaf  which  he  re- 
futes, in  ignoring  the  productive  action  of  capital. 
The  product  of  which  he  speaks  is  that  of  "  labor " 
alone ;  the  employer  takes  the  whole  of  it,  returns  a 
part  as  wages,  and  lives  on  the  proceeds  of  a  quasi- 
fraud.  Of  capital  as  a  joint  producer,  and  of  the 
consequent  claims  of  the  man  who  owns  and  uses  it, 
the  theory  takes  no  due  account.  On  the  single  point, 
however,  that  products  are  the  source  from  which  the 
laborer  derives  his  maintenance,  Mr.  George's  reason- 
ing is  as  conclusive  as  anything  in  mathematics. 

The  Wage-Fund  doctrine  once  prevalent  maintained 
that  the  laborer's  pay  comes  from  a  portion  of  capital 
antecedently  set  apart  for  that  purpose.  Some  influ- 
ence, the  nature  of  which  has  not  been  clearly  ana- 
lyzed, has  predetermined  that  the  whole  of  this  fund 


WAGES   AS    AFFECTED   BY   COMBINATIONS.         127 

shall  be  used  in  wage  payments.  If  the  number  of 
laborers  be  constant,  the  rate  of  wages  must  vary 
directly  as  the  size  of  the  fund.  If  the  fund  be  con- 
stant, the  rate  of  wages  must  vary  inversely  as  the 
number  of  laborers.  The  problem  resolves  itself  into 
a  simple  question  of  arithmetical  division.  Though 
this  crude  form  of  the  doctrine  may  be  antiquated, 
there  are  s*till  many  writers  who  retain  so  much  of 
it  as  to  argue  vigorously  that  wages  are  paid  from  a 
fund  of  capital  antecedently  accumulated. 

The  key  to  the  problem  lies  in  the  distinction  be- 
tween a  wage  payment  regarded  as  a  value,  a  thing 
of  pure  quantity,  and  a  wage  payment  regarded  as  a 
mass  of  concrete  commodities  of  a  kind  adapted  to 
the  laborer's  use.  It  is  one  thing  to  determine  from 
what  sum  the  amount  of  wealth  represented  by  wages 
is  deducted,  and  quite  a  different  thing  to  ascertain 
how  that  abstract  quantity  comes  to  embody  itself 
in  bread,  meat,  clothing,  implements,  etc.  If  the 
laborer  can  get  the  value  which  he  requires  for  his 
services,  he  can  embody  it  in  the  necessary  forms  by 
a  process  of  exchange.  As  a  problem  in  distribution 
the  present  inquiry  is,  What  is  the  real  source  of  the 
value  which  rewards  the  laborer? 

Labor  adds  to  the  wealth  of  its  employer.  The 
addition  is  necessary  and  continuous ;  from  the  mo- 
ment when  the  mill  begins  to  run  to  the  moment 
when  it  stops,  labor,  assisted  by  capital  in  different 


128        WAGES    AS   AFFECTED   BY   COMBINATIONS. 

forms,  is  increasing  the  possessions  of  the  man  or  the 
company  that  employs  it.  Let  the  wheel  of  the  en- 
gine make  a  dozen  revolutions;  there  is  an  inch  more 
of  cloth  upon  every  loom.  The  employer  recognizes 
this  addition  to  his  assets,  and  would  not  fail  to  take 
account  of  it  if  he  were  making  an  accurate  inventory. 
All  through  the  day  and  the  week  the  sum  of  his 
wealth  is  growing ;  and  when  he  pays  his  men  on 
Saturday  night,  he  takes  the  amount  of  their  wages, 
if  pure  quantity  alone  be  considered,  from  the  value 
that  has  come  into  existence  during  the  working  days. 

Let  a  man  pump  water  into  a  full  tank,  and  get 
what  he  wants  for  use  from  the  overflow ;  does  the 
water  for  consumption  come  from  the  tank  or  from 
the  pump  ?  In  a  sense  from  both ;  and  if  important 
interests  were  dependent  on  the  answer  given,  there 
would  be  here  an  opportunit}r  for  a  fierce  logomachy 
like  that  which  has  actually  arisen  over  the  origin  of 
wages.  The  particular  drops  which  are  used  come 
immediately  from  the  tank ;  but  the  amount  in  it  is 
undiminished,  and  the  draught  virtually  comes  from 
the  supply  furnished  by  the  pump.  Moreover,  the 
size  of  the  tank  has  no  influence  on  the  amount  of 
the  overflow ;  that  is  gauged  by  the  volume  of  the 
inflowing  stream.  In  like  manner  wages  are  taken 
immediately  from  a  reservoir  of  capital ;  but  the 
amount  in  that  reservoir  is  undiminished,  since  the 
quantity  which  is  drawn  from  it  has  already  been 


WAGES    AS    AFFECTED   BY    COMBINATIONS.         129 

added  to  it  by  the  stream  of  products  resulting  from 
industry.  It  is  the  volume  of  products  which  sets 
limits  to  the  amount  of  wages. 

The  hydraulic  figure  will,  perhaps,  bear  straining 
to  the  extent  of  representing  one  other  fact  in  the  re- 
lation of  capital  to  wages.  If  the  water  which  over- 
flows from  the  tank  be  regarded  as  better  in  quality 
than  that  which  is  pumped  into  it,  if,  for  example,  it 
loses  its  sediment  by  standing,  the  service  rendered 
by  the  reservoir  corresponds  to  a  certain  useful  office 
performed  by  capital.  The  quality  of  what  the  work- 
man receives  is  of  importance  to  him,  as  well  as  its 
quantity.  It  needs  to  come  to  him  in  available  forms. 
"  The  ploughman  cannot  eat  the  furrow,"  says  Mr. 
George,  though  the  furrow  is  wealth,  and  a  share 
of  it  is  wages,  in  the  sense  in  which  the  term  is  used 
in  Distribution.  The  weaver  cannot  eat  the  cloth 
upon  the  loom,  nor  can  he  even  wear  it.  He  must 
exchange  it,  or  the  employer  must  do  so  for  him. 
Society  must  take  it,  and  return  bread,  clothing,  etc. 
This  exchange  demands  social  capital;  it  would  be  in- 
teresting to  inquire  how  much,  but  the  inquiry  would 
take  us  into  another  department  of  economic  science. 
It  is  safe  to  assert,  without  waiting  for  a  full  demon- 
stration, that  society  does  not  lack  the  capital  that  is 
requisite  for  the  purpose,  and  that  wages  are  not  kept 
down  by  any  lack  of  means  of  exchanging  them 
as  the  needs  of  the  laborer  may  require. 


ISO         WAGES    AS    AFFECTED    BY    CUMIUNATIOKS. 

Wages,  in  the  primary  sense  of  the  term,  fire  the 
workman's  share  in  the  value  created  by  the  industry 
in  which  he  participates.  They  are  a  quantity  of 
wealth,  as  determined  by  a  process  in  Distribution. 
In  a  secondary  sense  they  are  that  abstract  value  as 
embodied  in  available  forms  by  a  process  in  Exchange. 

There  is,  then,  a  question  of  division  at  issue  be- 
tween the  workmen  and  their  employers.  That  divi- 
sion may  be  regarded  in  general  or  in  detail ;  wages 
as  a  whole  and  profits  as  a  whole  come  from  a  cer- 
tain aggregate  sum ;  the  wages  of  particular  groups 
of  workmen  and  the  profits  of  their  employers  come 
from  distinguishable  portions  of  that  aggregate.  The 
reward  of  the  working  class  as  a  whole  conies  from 
the  total  value  of  the  completed  products  of  society; 
that  of  particular  workmen  and  groups  of  workmen 
comes  from  the  value  of  specific  sub-products.  In  terms 
of  our  diagram  the  amount  falling  to  L,  L/,  L",  etc., 
taken  as  a  whole,  comes  from  the  value  of  the  prod- 
uct, nails ;  while  the  share  of  L  comes  from  1st  Sub- 
P.,  that  of  L'  from  2d  Sub-P.,  etc.  The  wage  in  a 
particular  case  is  determined,  first,  by  the  amount  of 
the  sub-product  from  which  it  is  taken,  and  secondly, 
by  the  terms  of  the  division  between  C  and  L.  As- 
sign fixed  proportions  of  the  sub-product  to  capital  and 
to  labor  respectively,  and  the  reward  of  each  will 
vary  directly  as  the  sub-product.  This  would  be  the 
case  in  a  system  of  cooperation,  or  in  one  of  profit- 


WAGES    AS    AFFECTED    BY    COMBINATIONS.         131 

sharing  of  a  certain  kind.  Let  the  sub-product  be  a 
constant  quantity,  and  wages  and  profits  will  vary 
according  to  the  division  between  them. 

The  historical  fact  of  the  past  three  hundred  and 
fifty  years  has  been  that  real  wages  have  declined  for 
three  centuries  and  advanced  for  a  half-century.  The 
decline  was  not  continuous;  there  was  a  rapid  fall,  a 
partial  recovery,  and  a  second  fall,  leaving  the  work- 
men, in  other  than  specially  favored  countries,  in 
extreme  wretchedness.  This  great  decline  in  wages 
took  place  during  an  era  of  generally  conservative 
competition;  while  the  advance  which  has  followed 
it  has  been  recent,  and  has  taken  place  in  an  era 
in  which  the  money-getting  spirit  has  overcome  the 
former  conservative  influences,  and  in  which  compe- 
tition, in  the  fields  in  which  it  survives,  has  been 
of  an  unsparing  character.  Both  of  the  determining 
causes  above  mentioned  have  contributed  to  this 
result.  There  has  been  a  vast  increase  in  the  quan- 
tity of  wealth  produced;  and  this  fact  may  have  suf- 
ficed to  increase  the  laborer's  reward  without  any 
enlargement  of  his  proportionate  share  of  the  sub- 
product.  Whether  the  division  is,  at  the  present  day, 
taking  place  on  terms  more  favorable  to  the  laborer 
than  those  which  ruled  fifty  years  ago  is  of 'far  less 
consequence  than  the  question  whether  the  present 
principle  of  division  is  one  which  must  yield  perma- 
nently better  results  than  the  old  one.  That  real 


132        WAGES   AS  AFFECTED   BY   COMBINATIONS. 

wages  are  high  this  year  is  of  little  importance  in 
comparison  with  the  fact  that  they  are  adjusted  by  a 
process  which  promises  to  make  them  higher  next 
year,  and  still  higher  in  the  years  following,  a  pro- 
cess which  offers  a  permanent  guaranty  against  the 
resumption  of  the  hopeless  downward  tendency  which, 
under  the  former  system,  was  regarded  as  "  natural." 

The  old  principle  of  division  rendered  gross  injus- 
tice inevitable;  the  present  principle  makes  equity 
possible.  A  fair  bargain  demands  either  a  desire  for 
justice  on  the  part  of  the  participants,  or  strategic 
equality  between  them.  The  weak  and  the  powerful 
may  deal  equitably  with  each  other  if  justice  rather 
than  selfish  interests  be  the  end  in  view;  in  the 
absence  of  this  moral  force  weakness  must  be  matched 
against  weakness,  and  strength  against  strength.  A 
maximum  of  justice  in  distribution  is  attained  where 
the  brute  forces  are  evenly  matched,  and  where  moral 
influences  are  efficient.  A  minimum  of  justice  results 
where  brute  forces  are  unequal,  and  moral  forces 
wanting. 

The  phenomenon  of  the  long  era  of  declining  wages 
was  the  concurrence  of  strategic  inequality  between 
capitalists  and  laborers,  with  a  certain  disorganization 
of  the  moral  forces  of  society.  The  crude  forces  of 
capital  and  labor  were  not  as  unequal  as  they  might 
have  been,  and  moral  forces  were  not  utterly  wanting. 
The  general  ethics  of  the  market  may  have  been  bet 


WAGES   AS   AFFECTED   BY   COMBINATIONS.          133 

ter  than  those  which  have  prevailed  during  the  last 
few  decades.  The  lack  in  this  direction  has  been  of 
organization.  The  moral  forces  in  distribution  have 
not  been  distinctively  social  forces,  but  have  acted 
sporadically  upon  individuals. 

For  the  present  we  have  to  consider  the  brute 
forces  of  distribution.  The  employer  is,  as  we  have 
seen,  the  purchaser  of  the  laborer's  share  of  a  sub- 
product.  In  the  transaction  capital  is  necessarily  a 
unit.  Whether  the  employer  be  an  individual  or  a 
corporation,  it  is  as  though  there  were  but  one  man 
wielding  the  force  of  the  entire  capital  of  a  produc- 
tive establishment,  in  the  effort  to  secure  advanta- 
geous terms  from  the  workmen.  If,  now,  the  workmen 
act  not  collectively,  but  individually,  if  they  compete 
vigorously  with  each  other  for  employment,  they  di- 
vide their  forces  against  themselves,  assist  the  capital- 
ist, and  forfeit  all  hope  of  a  successful  issue  of  the 
contest.  The  army  of  labor  fires,  as  it  were,  into  its 
own  ranks.  The  distributive  phenomena  of  the  past 
have  been  distinctively  those  of  unbalanced  competition. 

The  strategic  inequality  in  the  position  of  capital- 
ists and  laborers  would  be  at  a  maximum  if  there  were 
but  one  employer  in  a  locality,  and  if  employe's  were 
numerous,  unorganized,  and  unable  to  migrate.  If, 
in  addition  to  this,  the  ethico-economic  rule  of  "  every 
man  for  himself"  were  a  recognized  principle  of  ac- 
tion, the  result  would  be  a  society  composed,  indeed, 


134         WAGES    AS   AFFECTED   BY   COMBINATIONS. 

of  men,  but  completely  dehumanized  in  its  organic 
action.  It  would  be  a  collective  brute. 

Such  a  condition  was  not  fully  realized,  but  was 
approximated  during  the  period  of  declining  wages. 
The  degree  of  approximation  sufficed  to  reduce  wages 
to  a  starvation  limit.  There  was  some  competition 
among  employers ;  their  shops  were  small  and  rela- 
tively numerous.  There  was  an  appreciable  chance 
of  realizing  the  condition  described  by  Cobden,  by 
the  formula,  "two  bosses  after  one  man";  but  this 
chance  was  indefinitely  more  than  offset  by  the  greater 
frequency  and  intensity  of  the  struggles  of  the  men 
to  secure  employment  from  the  "one  boss." 

Aside  from  the  greater  unity  of  action  on  the  side 
of  capital,  there  was  a  source  of  unfairness  in  the  dis- 
tributive contest  in  the  unequal  motives  of  the  com- 
petitors on  the  different  sides.  The  impulse  to  raise 
wages  never  equalled  the  impulse  to  depress  them. 
The  employers  had  less  at  stake  in  the  struggle  to 
enlarge  their  working  forces,  than  had  the  laborers 
in  the  contest  for  employment.  The  man  without 
work  must  obtain  it  or  starve ;  the  employer  with 
too  few  hands  must  content  himself  with  smaller 
gains  than  he  would  like  to  realize.  The  man  hav- 
ing to  choose  between  something  and  nothing,  might 
soon  be  compelled  to  take  half-pay.  On  the  other 
hand,  employers,  even  in  the  prosperous  seasons  in 
which  they  compete  with  each  other  for  men,  have 


WAGES   AS    AFFECTED    BY   COMBINATIONS.         135 

no  interest  in  raising  wages  to  the  extent  of  lessen- 
ing their  aggregate  profits;  and  this  point  is  usually 
reached  after  a  relativel}'  moderate  rise.  Employ- 
ment at  half-pay  might  save  a  man  from  starvation; 
but  the  payment  of  double  wages  would,  in  most 
cases,  speedily  bankrupt  the  employer. 

If  these  sources  of  inequality,  even  in  the  age  of 
small  industries,  left  to  the  laborers  nothing  but  a 
precarious  subsistence,  what  was  to  be  expected  from 
centralization  ?  In  each  producing  centre,  a  score  of 
little  shops  have  yielded  to  a  single  great  establish- 
ment, and  if  the  laborers  had  remained  unorganized, 
the  competitive  process  would  have  been  thrown 
more  hopelessly  out  of  balance ;  strife  among  em- 
ployers to  secure  workmen  would  have  been  lessened, 
and  that  among  men  to  secure  employment  would 
have  been  increased.  In  addition  to  this  the  spirit 
of  the  market  has  undergone  a  change  ;  conservative 
influences  have  been  thrown  off,  and  the  struggle 
for  gain  has  become  undisguised  and  intense.  Under 
such  circumstances,  the  fate  of  the  workingman,  were 
he  acting  in  isolation,  would  indeed  be  sealed ;  his 
condition  would  be  determined  by  a  struggle  of 
brute  forces,  and  these  would  stand  as  ten  to  one 
against  him.  Yet  the  historical  fact  of  the  past 
half-century  has  been  that  the  workman's  condition 
has  improved.  He  has  thriven  on  centralization  and 
an  intense  struggle  for  existence. 


136         WAGES   AS   AFFECTED    BY   COMBINATIONS. 

Of  the  two  possible  causes  of  higher  wages  both 
have  been  in  action  in  recent  years ;  there  has  been 
more  to  divide,  and  the  division  has  been  made  under 
more  equal  conditions.  The  influence  with  which 
we  are  immediately  concerned  is  the  equalization 
which  has  taken  place  in  the  brute  forces  of  dis- 
tribution. A  more  nearly  balanced  competition  has 
replaced  the  former  one-sided  process.  Massed  labor 
has  been  pitted  against  massed  capital,  by  trades 
unions,  and  by  the  more  recent  and  general  union  of 
the  Knights  of  Labor,  which  aims — with  what  per- 
manent result  remains  to  be  seen  —  to  secure  the 
solidarity  of  the  entire  working  class. 

It  will  be  seen  that  the  twofold  process  of  first 
throwing  competition  out  of  balance  and  then  restor- 
ing its  equilibrium,  has  had  the  effect  of  ruling  a  great 
part  of  it  out  of  existence.  The  equality  has  been 
secured,  not  by  restoring  competition  on  the  side  of 
capital,  but  by  suppressing  it  on  the  side  of  labor. 
As  the  growth  of  a  great  corporation,  absorbing  all 
small  establishments  in  a  locality,  suppresses  compe- 
tition among  employers,  the  growth  of  a  well-organ- 
ized trades  union  suppresses  it  among  workmen.  If 
both  processes  were  consummated,  and  one  corporation 
produced  the  entire  supply  of  a  particular  article,  while 
a  trades  union  controlled  the  entire  labor  force  avail- 
able for  its  production,  actual  competition  would  be  at 
an  end,  and  the  division  of  the  product  would  be  effected 


WAGES    AS    AFFECTED    BY    COMBINATIONS.         137 

by  a  bargaining  process  tintempered  by  any  of  the  con- 
servative influences  by  which,  in  an  open  market, 
contracts  are  actually  made.  There  would  be  no  alter- 
native buyers  and  sellers ;  the  laborers  would  be  com- 
pelled to  sell  their  share  of  the  product  to  the  one 
corporate  employer ;  and  that  employer  would  be 
compelled  to  buy  the  product  of  the  trades  union, 
which,  in  a  sense,  is  a  single  corporate  laborer.  The 
adjustment,  if  left  to  be  effected  by  crude  force,  would 
produce  disturbances  too  disastrous  to  be  tolerated,  and 
arbitration  on  a  comprehensive  scale  would  be  a  prime 
necessity. 

This  condition  is,  as  yet,  only  approximated.  The 
solidarity  of  labor  and  capital  is  very  incomplete.  Cor- 
porations have  not  become  absolute  monopolies  in  their 
respective  fields ;  trades  unions  do  not  include  all  work- 
men. The  bargaining  process  between  capital  and  labor 
is  not  the  blind  and  desperate  struggle  that  it  might  be. 
It  is  tending  towards  that  condition,  and  becoming,  in 
a  corresponding  degree,  dependent  on  arbitration. 

The  solidarity  of  labor  has  developed,  first,  in  the  line 
of  occupation,  and,  secondly,  in  a  line  independent  of 
occupation.  Trades  unions  are  old ;  the  organization 
of  the  Knights  of  Labor  is  new.  They  represent 
respectively  two  distinct  economic  conditions,  of  which 
the  one  is  characteristic  of  the  past  and  the  other  of 
the  present.  In  the  one  condition  trades  are  dominant 
in  the  field  of  industry ;  in  the  other  they  are  of  reduced 
importance. 


138         WAGES    AS   AFFECTED    BY    COMBINATIONS. 

The  factory  system,  with  its  differentiation  of  manu- 
facturing processes,  has  given  to  the  term  skilled  labor 
a  significance  quite  distinct  from  that  which  formerly 
attached  to  it.  The  difference  between  the  skilled  and 
the  unskilled  workman  was  once  largely  personal.  The 
one  had  attained,  by  a  long  course  of  industrial  educa- 
tion, a  mental  and  physical  status  which  made  him,  for 
economic  purposes,  a  different  being  from  the  other. 
Native  endowment  played  a  large  part  in  broadening 
the  line  of  demarcation  ;  men  adopted  trades  for  which 
nature,  hereditary  or  otherwise,  had  fitted  them,  and 
attained  a  success  beyond  the  reach  of  the  personally 
unfit.  The  subdivision  of  labor  has  reduced  the  differ- 
ences between  trades,  by  reducing  the  trades  themselves 
to  a  minimum.  The  occupation  of  watch-maker  once 
involved  an  ability  to  make  an  entire  watch  ;  and  the 
person  who  could  perform  this  difficult  industrial  func- 
tion was  in  no  danger  of  competition  from  any  but  the 
few  who,  like  himself,  had  been  able  to  serve  the  needed 
apprenticeship.  This  trade,  in  the  full  sense,  no  longer 
exists.  In  its  place  are  a  score  of  far  simpler  trades, 
each  limited  to  the  performance  of  a  minute  portion  of 
the  watch-making  process.  The  functions  requiring 
especial  deftness  and  accuracy  have  been  handed  over 
to  machines,  and  the  difficulty  of  becoming  a  member  of 
the  watch-producing  group  has  been  reduced  to  a 
minimum.  Though  the  occupation  now  demands  far 
less  of  personal  superiority,  native  and  acquired,  than 


WAGES    AS    AFFECTED    BY    COMBINATIONS.         139 

was  formerly  necessary,  yet,  on  the  other  hand,  it 
develops  greater  actual  dexterity.  The  little  that  the 
artisan  now  does  he  does  exceedingly  well.  In  a  sense, 
therefore,  nearly  all  the  labor  engaged  in  manufacturing 
processes  is  highly  skilled ;  yet  but  little  of  it  requires 
the  personal  attainments  which  were  necessary  under 
the  old  regime. 

The  subdivision  of  trades  is  not  equally  practicable 
in  all  departments,  and  some  occupations  still  demand 
skilled  labor  in  the  original  sense  of  the  term.  It  is 
noticeable  that  in  such  occupations  trades  unions  are 
especially  vigorous.  No  industrial  development  has 
yet  lessened  the  skill  and  the  moral  quality  required  of 
a  good  locomotive  engineer,  and  the  brotherhood  of 
men  of  this  craft  is  one  of  the  strongest  of  the  guilds. 
Building  trades,  type-setting,  and  not  a  few  other  em- 
ployments, are  conducted  by  methods  so  similar  to 
those  which  prevailed  in  the  old  era  as  to  furnish  a 
basis  for  vigorous  organizations  within  the  lines  drawn 
by  occupation. 

Where,  however,  the  subdivision  of  trades  has  pro- 
ceeded to  considerable  lengths,  the  effect  has  been  to 
lessen  the  efficiency  of  the  trades  union  for  the  purpose 
for  which  it  was  designed.  It  can  less  easily  control 
the  market  for  a  particular  kind  of  labor.  The  brother- 
hood of  locomotive  engineers  has  a  certain  control  of 
the  market  for  its  own  kind  of  labor,  because  its  mem- 
bership includes  a  large  majority  of  those  who  practise 


140         WAGES   AS   AFFECTED   BY   COMBINATIONS. 

the  craft,  and  because  the  difficulty  of  acquiring  the 
art  renders  new  men  for  a  long  time  useless. 

In  trades  which  have  been  so  subdivided  that  the  mas- 
tership of  a  few  simple  operations  is  all  that  is  required 
of  one  workman,  the  case  is  different.  The  members 
of  a  craft  like  this  stand  more  nearly  on  a  plane  with 
the  army  of  the  unskilled.  Though  a  union  were  to 
embrace  all  who  now  practise  such  an  occupation,  it 
would  be  impossible  to  include  all  who  are  capable  of 
practising  it  after  a  brief  apprenticeship.  It  certainly 
cannot  include  all  the  Chinese,  Hungarians,  and  Ital- 
ians. In  most  cases  it  by  no  means  includes  all  Ameri- 
cans who  are  now  masters  of  the  trade ;  and  a  strike, 
though  sustained  by  the  entire  brotherhood,  cannot 
compel  an  employer  to  make  concessions,  unless  it  can 
prevent  him  from  resorting  to  the  reserve  force  of  the 
unemployed.  For  the  preventing  of  such  a  resort  there 
are  two  methods:  first,  coercion,  crude  or  refined,  which 
shall  prevent  men  from  taking  the  places  vacated  by 
striking  craftsmen ;  and  secondly,  the  formation  of  a 
labor  organization  which  shall  proceed  independently 
of  occupation,  and  endeavor  ultimately  to  include  the 
reserve  force  from  which,  during  a  strike,  the  employer 
may  draw  a  new  quota  of  men. 

Both  of  the  above  methods  are  now  in  operation ; 
potent  influences  deter  non-union  men  from  accepting 
work  while  a  strike  is  pending;  and  a  strong  effort  is 


WAGES   AS   AFFECTED   BY   COMBINATIONS.         141 

making  to  unite  all  labor  in  a  general  guild.  The  novel 
feature  of  the  former  process  is  the  use  of  the  boycott. 
This  is  a  mode  of  coercion  applied  to  employers,  not 
only  for  the  purpose  of  extorting  direct  concessions 
from  them,  but  for  the  purpose  of  indirectly  coercing 
the  non-union  men.  The  object  for  which  it  is  most 
frequently  used  is  to  compel  employers  to  retain  only 
members  of  the  guild  in  their  service.  The  coercive 
agency  consists  in  the  cutting  off  of  the  market  for  the 
employer's  products. 

Were  these  products  sold  directly  to  the  workmen,  a 
sufficiently  extensive  labor  union  could  effectually  boy- 
cott the  producer  by  simply  refraining  from  the  pur- 
chase of  the  articles.  In  most  cases  the  direct  customers 
for  the  goods  do  not  belong  to  the  working  class,  and  the 
boycott,  in  order  to  reach  the  producer,  must  attack  the 
retailers  who  sell  his  products.  These  are  numerous, 
and  a  boycott  which  passes  only  to  the  second  degree 
must  often  coerce  scores  of  men  in  order  to  extort  the 
desired  concession  from  one.  Yet  boycotts  of  the  third 
degree  are  frequent.  A  newspaper  is  coerced  by  com- 
pelling the  withdrawal  of  profitable  advertisements ;  if 
the  advertisers  are  manufacturers,  they  must  be  reached 
through  the  retail  dealers. 

The  ultimate  weakness  of  the  boycott,  as  an  instru- 
ment for  benefiting  the  laborer,  lies  in  the  necessity 
for  thus  widening  the  circle  within  which  it  is  applied. 
The  disturbances  created  by  it  are  out  of  all  proportion 


142        WAGES   AS   AFFECTED   BY   COMBINATIONS. 

to  the  ends  secured.  In  slightly  benefiting  a  class,  it 
inflicts  a  large  injury  upon  society.  Even  more  than 
the  strike  does  the  boycott  need  to  be  held  in  reserve, 
with  masterly  strategy,  and  seldom  actually  applied. 
The  ultimate  power  to  boycott,  if  skilfully  used  by  the 
director  of  a  labor  organization,  may  force  many  con- 
cessions from  employers ;  the  frequent  application  of 
the  force  must  speedily  defeat  its  own  ends.  The  sur- 
prising degree  of  success  which  the  boycotting  system 
in  its  early  stages  attained,  is  not  to  be  anticipated 
hereafter,  unless  it  is  used  with  consummate  wisdom. 
It  is  ruinous  policy  to  push  it  beyond  what  may  be 
termed  the  tolerance  of  society. 

The  success  of  the  boycott,  when  kept  within  pru- 
dent limits,  lies  wholly  in  the  power  of  federated  labor 
to  dictate  the  conduct  of  retail  dealers ;  and  this  power 
is  based  on  competition.  It  is  the  existence  of  rival 
dealers  that  is  the  decisive  fact  in  the  situation.  The 
boycott  promises  to  benefit  the  dealer  who  submits  to 
it,  at  the  cost  of  all  who  resist.  The  labor  union  ap- 
proaches the  retailer  not  merely  with  a  threat,  but  also 
with  a  promise.  If  A  complies  with  its  demand  while 
B,  C,  D,  and  E  resist,  the  union  will  turn  to  A's  shop 
a  large  part  of  the  patronage  of  the  other  four.  An 
anti-boycott  union  among  retail  dealers  needs  to  be 
universal,  in  order  to  be  effective ;  and,  in  the  absence 
of  such  a  complete  concert  of  action,  a  merchant  of 
this  class  is  interested  to  secure,  by  a  prompt  surrender 


WAGES   AS   AFFECTED   BY   COMBINATIONS.         143 

to  the  boycotters,  an  immunity  from  harm  and  a  pos- 
sible benefit.  If  fully  organized,  retailers  might  be 
capable  of  valor  in  an  encounter  with  labor  unions ; 
as  unorganized,  they,  as  a  rule,  strive  only  to  outdo 
each  other  in  discretion. 

Even  when  the  ends  for  which  it  is  used  are  eco- 
nomic, the  boycott,  as  an  instrument,  is  extra-economic 
and  definitely  illegal.  Narrow  policy  on  the  part  of 
laborers  demands  an  exceedingly  limited  use  of  it ; 
broad  policy  dictates  a  line  of  conduct  identical  with 
that  demanded  by  morality,  and  that  is  the  total  sup- 
pression of  the  practice.  From  this  time  onward  the 
success  of  labor  unions  depends  on  the  strength  of  their 
moral  position  ;  and  it  is  indefinitely  better  for  them 
to  voluntarily  relinquish  an  illegal  practice  than  to  be 
forced  to  do  so  by  officers  of  the  law. 

Rapidly  as  organizations  of  workmen  have  lately 
grown,  the  solidarity  of  capital  is,  thus  far,  greater  than 
that  of  labor.  Eight  men  have  been  said  to  control  the 
production  of  anthracite  coal,  and  combinations  of 
similar  character  control  that  of  lumber,  glass,  nails, 
gunpowder,  rope,  cutleiy,  and  a  hundred  other  staple 
articles.  In  the  language  of  our  formulas,  the  non-com- 
peting groups  are  solidifying  into  great  corporations; 
and  as  competition  between  the  producers  of  dissimilar 
sub-products  is  impossible  by  nature,  that  between  the 
makers  and  vendors  of  the  same  sub-product  is  being 
suppressed  by  art.  Nail-makers  cannot  compete  with 


144         WAGES   AS   AFFECTED   BY   COMBINATIONS. 

cloth-makers,  and  they  do  not  compete  with  each 
other. 

The  object  of  these  combinations  is  to  control  the 
prices  of  products.  They  operate  in  what  we  have 
termed  the  primary  and  secondary  fields  of  distribution, 
while  labor  unions  operate  in  the  ternary.  Employers 
combine  against  the  public,  and  workmen  against  em- 
ployers. The  associations  of  capitalists  are  able  to  act 
directly  against  striking  and  boycotting  workmen,  and 
are,  indeed,  beginning  to  do  so.  This  is,  however,  a 
new  field  for  their  action ;  and  even  in  their  original 
field  their  operation  reacts  in  two  ways  upon  real 
wages. 

The  raising  of  the  price  of  a  commodity  produced  by 
a  confederation  of  employers  is  possible  only  by  curtail- 
ing production.  If  the  price  is  raised  while  production 
is  unrestrained,  goods  accumulate  till  forced  sales  are 
necessary,  and  the  combination  is  broken. 

It  is  for  the  interest  of  every  group  that  its  produc- 
tion of  commodities  should  be  small,  and  that  of  other 
groups  large.  In  that  case  the  terms  of  exchange 
between  the  one  group  and  the  others  will  be  favorable 
to  this  particular  group.  By  making  less  nails  one  par- 
ticular class  of  producers  secure  for  themselves  more 
food,  clothing,  etc.  Of  course  this  is  at  the  cost  of  the 
other  groups,  and  when  they  retaliate  by  a  curtailment 
of  their  own  production,  the  gain  of  the  nail-makers 
is  more  than  neutralized,  and  new  injuries  are  inflicted 


WAGES    AS    AFFECTED    BY    COMBINATIONS.         145 

on  all.  Under  free  competition  the  production  of  each 
commodity  tends  towards  a  normal  quantitative  limit, 
at  which  point  labor  is,  Avith  allowance  for  certain  vari- 
ations, as  well  rewarded  in  that  industry  as  in  others. 
If  a  single  industrial  group  were  to  curtail  its  produc- 
tion beyond  the  normal  limit,  it  might  gain,  but  society 
would  suffer ;  while  the  outcome  of  a  general  artificial 
curtailment  would  be  a  general  social  injury. 

The  gain  which  comes  to  a  particular  group  by  a 
lessening  of  its  production  accrues  mainly  to  em- 
ployers; the  injury  which  it  suffers  from  a  similar 
action  on  the  part  of  other  groups  falls  largely  on  the 
men.  If  nail-producers  can  so  limit  their  output  as  to 
secure  a  price  higher  by  a  half  than  the  one  formerly 
prevailing,  they  can  retain  most  of  the  gain  for  them- 
selves. Wages  in  this  single  industry  cannot  be  greatly 
raised  independently  of  the  general  labor  market.  A 
demand  made  at  the  moment  when  the  price  of  nails 
rises  may  give  to  the  workmen  a  portion  of  the  gain 
realized  by  their  producing  group;  but  the  gain  cannot 
raise  these  workmen  far  above  the  level  of  others,  while 
the  increase  of  the  employer's  profits  may  be  much 
greater. 

On  the  other  hand,  the  workmen  suffer  most  from  the 
injury  which  is  entailed  upon  society  by  artificial  re- 
strictions upon  production.  They  are  preeminently 
consumers.  They  compose  a  large  numerical  propor- 
tion of  society;  they  consume  the  largest  portion 


14()          WAGES    AS    AFFECTED    BY    COMBINATIONS. 

of  their  incomes,  and  they  spend  it  largely  for  things 
which  they  cannot  forego  without  privation.  For  these 
three  reasons  they  are  specially  sensitive  to  the  injury 
resulting  from  enhanced  prices  of  articles  of  ordinary 
consumption. 

There  is  a  second  way  in  which  employers'  combina- 
tions react  detrimentally  upon  wages.  A  curtailment 
of  the  production  of  a  particular  commodity  means  a 
lessened  demand  for  labor  within  the  group  which 
produces  it.  A  struggle  between  the  groups  to  outdo 
each  other  in  limiting  production  would  mean,  to  the 
laborers,  an  effort  on  the  part  of  each  group  to  thrust 
laboring  men  into  other  groups.  As  the  attempt 
becomes  general,  the  result  is  a  thrusting  of  laborers 
either  into  the  reserve  force  of  the  unemployed,  or  into 
the  one  department  in  which  employers'  combinations 
are  impossible,  namely,  agriculture.  The  power  of 
agricultural  industry  to  absorb  the  working  force  ex- 
cluded from  other  fields  is  becoming  limited,  and  the 
army  of  the  unemployed  must  receive  an  increasing 
proportion  of  them.  The  reaction  of  this  fact  upon  the 
reward  of  labor  is  direct  and  resistless ;  no  combination 
of  workmen  can  undo  the  depressing  effect  upon  their 
own  wages  of  the  presence  of  a  large  force  of  idle  men. 
Upon  the  men  thrown  out  of  employment  the  effect  of 
curtailed  production  is  obvious ;  it  is  equally  so  upon 
society.  It  means  pauperism,  crime,  embittered  con- 
tests, and  an  added  strain  upon  republicanism. 


WAGES   AS   AFFECTED   BY   COMBINATIONS.         147 

Although  it  was  not  the  original  object  of  employers' 
unions  to  directly  oppose  trades  unions,  the  present 
tendency  of  labor  movements  is  to  make  it  morally 
certain  that  they  will  be  used  for  that  purpose.  This 
wholesale  suppression  of  competition  will  bring  society 
to  a  point  from  which  the  only  outcome  consistent  with 
peace  will  be  arbitration  under  governmental  authority. 
Rapid  progress  in  this  direction  is  the  great  economic 
fact  of  the  present  day.  Competition  still  exists  and, 
within  certain  fields,  is  active.  There  is  competitive 
action  among  merchants,  among  railroads  not  in  a  pool, 
among  manufacturers  not  in  a  combination,  and  among 
workmen  outside  of  a  union.  Moreover,  the  latent 
possibility  of  competition  among  the  members  of  a 
combination  is  an  economic  fact  of  vast  importance  to 
society.  Yet  the  fact  remains  that,  in  the  field  where 
its  work  is  the  most  important,  in  the  division  of  the 
products  of  industry  between  groups,  sub-groups  and 
classes,  competition  of  the  individualistic  type  is  rapidly 
passing  out  of  existence.  The  principle  which  is  at  the 
basis  of  Ricardian  economics  is  ceasing  to  have  any 
general  application  to  the  system  under  which  we  live. 

The  problem  of  the  future  is  the  extent  to  which 
movements  now  in  progress  will  actually  go.  In  their 
possible  scope  they  are  highly  revolutionary.  Solidarity 
carried  to  its  logical  consummation  would  create  a 
social  condition  so  utterly  unlike  the  present  one  that 


148         WAGES   AS   AFFECTED   BY   COMBINATIONS. 

it  could  hardly  be  established  without  violent  overturn' 
ings. 

The  immediate  subject  for  economic  study  is  the  con- 
dition to  which  the  movement  has  already  brought  us. 
The  present  state  of  industrial  society  is  transitional 
and  chaotic.  The  consolidation  of  labor  is  incomplete, 
that  of  capital  is  so ;  and  the  relation  between  the  two 
is  not  what  it  was  yesterday,  nor  what  it  will  be 
to-morrow.  Yet  something  may  be  said  of  social  con- 
ditions existing  in  the  interim  between  the  old  and  the 
new.  The  crudeness  of  the  transitional  system  has 
begotten  lawlessness.  Labor  is  employing  irregular 
methods  in  the  contest  with  capital ;  capital  is  using 
injurious  methods  in  its  dealings  with  society.  Indi- 
vidual competition,  the  great  regulator  of  the  former 
era,  has,  in  important  fields,  practically  disappeared. 
It  ought  to  disappear ;  it  was,  in  its  latter  days,  inca- 
pable of  working  justice.  The  alternative  regulator 
is  moral  force,  and  this  is  already  in  action.  It  is 
accomplishing  much,  though  it  is  in  the  infancy  of  its 
distinctively  social  development.  The  system  of  indi- 
vidualistic competition  was  a  tolerated  and  regulated 
reign  of  force ;  solidarity,  even  in  its  present  crude 
state,  presents  the  beginnings  of  a  reign  of  law. 


CHAPTER   IX. 

THE    ETHICS    OF    TRADE. 

A  WORKING  MAN,  who  is  well  versed  in  political  econ- 
omy, once  told  me  that  the  reading  of  Ricardo  had  con- 
vinced him  that  there  is  no  hope  for  the  laboring  class 
under  the  existing  system  of  industry.  Competition,  as 
he  was  compelled  to  think,  must  sooner  or  later  reduce 
workmen  to  the  starvation  limit,  and  keep  them  there. 
In  times  of  exceptional  distress,  it  must  drive  them  be- 
low that  limit,  and  only  restore  them  to  it  through  the 
lessening  of  their  number  by  actual  death.  His  hopes 
for  the  future  of  his  class  were  founded  on  a  change  in 
the  industrial  system,  which  should  substitute  coopera- 
tion for  competition. 

This  man  is  representative ;  his  premises  are  those  of 
Ricardo  and  his  school,  and  his  conclusions  are  those  to 
which  many  readers  are  forced.*  This  fact  explains  the 
popularity  of  othodox  economic  literature  among  de- 
clared socialists.  It  prepares  the  soil  for  revolutionary 
seed.  A  demonstration  of  the  hopelessness  of  the  old 
economic  system  is,  to  a  man  who  retains  his  natural 
optimism,  equivalent  to  a  proof  that  a  new  system  is 
coming.  The  new  era  has,  in  fact,  begun,  but  it  has 
not  brought  socialism. 

*  Ricardo's  own  conclusion  was  different;  his  "natural  price  of  labor" 
was  not  literally  a  starvation  rate. 


150  THE   ETHICS    OF  TRADE. 

The  weakness  of  Ricardianism  is  known  to  lie  in  its 
premises ;  these  are  sweeping  assumptions  at  variance 
with  the  facts  of  life.  It  may  now  be  seen  that  the 
fundamental  principle  of  this  scientific  system,  that  of 
free  individual  competition,  is  not  permanent,  and  that 
the  industrial  regime  to  which  the  old  science  was  in- 
tended to  apply  is  self-terminating.  There  is  a  promise 
of  an  industrial  revolution  in  the  very  laws  of  Ricar- 
dianism. 

The  purely  competitive  system  of  industry  has  had 
its  youth,  its  manhood  and  its  decrepitude.  It  has  de- 
veloped, first,  a  conservative  rivalry,  then  a  sharp  and 
destructive  contest,  and,  finally,  a  movement  toward 
consolidation  and  monopoly.  The  final  stage  has  but 
lately  been  reached,  and  the  system  of  distribution 
which  characterizes  it  is,  as  yet,  imperfectly  developed. 

Moral  force  as  an  economic  agent  is  the  characteristic 
of  the  new  regime.  This  agent  is  new  only  in  the  field 
of  its  operation  and  in  the  extent  of  its  work.  In  itself 
it  is  an  old  and  ultra-orthodox  economic  force.  It  is  a 
radical  error  which  represents  competition  itself  as  the 
outworking  of  unmixed  selfishness.  There  is  an  ele- 
ment of  morality  in  it ;  it  is  a  restrained  and  qualified 
strife,  and  owes  such  continuance  as  it  has  had  to  the 
forces  that  have  held  it  within  bounds.  An  unrestricted 
struggle  for  wealth  is  impossible  in  any  collection  of 
men  that  can  be  termed  a  society ;  it  has  never  existed, 
in  fact,  since  the  time  of  Adam.  It  would  be  a  savage 


THE    ETHICS    OF   TRADE.  151 

and  ignoble  strife,  in  which  every  man's  hand  would  be 
against  his  neighbor.  Deprive  a  pack  of  wolves  of  the 
tribal  instinct  that  keeps  them  from  rending  each  other, 
and  place  a  single  carcass  before  them,  and  their  con- 
duct may  illustrate  the  economic  system  which  would 
result  from  the  unrestrained  action  of  selfish  motives 
among  men. 

Competition  without  moral  restraints  is  a  monster  as 
completely  antiquated  as  the  saurians  of  which  the  geol- 
ogists tell  us.  To  find  anything  approaching  it  in  actual 
life  we  must  go  farther  back  than  history  reaches,  be- 
yond the  lake-dwellers  of  Switzerland  and  the  cliff 
villagers  of  neolithic  times,  quite  to  the  isolated  troglo- 
dyte, the  companion  of  the  cave  bear.  Even  here  the 
illustration  will  be  incomplete ;  for  the  troglodyte  had  a 
family,  and,  within  the  precinct  of  his  home,  was  ruled  by 
higher  motives.  The  intercourse  of  this  rudest  of  men 
with  others  of  his  kind  may,  however,  be  conceded, 
safely  enough,  in  the  absence  of  evidence  to  the  con- 
trary, to  have  been  dictated  by  the  lowest  of  motives, 
and  to  have  tolerably  well  illustrated  the  process  of 
unrestrained  competition.  The  supposition  may  be  a 
slander  on  the  troglodyte ;  but  as  he  is  now  past  hear- 
ing of  it,  and  is  not  present  with  his  club  to  avenge  it, 
we  may  admit  the  supposition  that  the  intercourse  of 
the  isolated  cave-dwellers  with  each  other  presented  an 
illustration  of  competitive  strife  unqualified  by  moral 
forces.  Two  wild  huntsmen  pursuing  the  same  animal, 


152  THE   ETHICS   OF   TRADE. 

and  then  clubbing  and  tearing  each  other  for  the  posses- 
sion of  its  body,  may  illustrate  the  process. 

Though  such  may  have  been  the  conduct  of  cave- 
dwellers  toward  each  other  outside  of  the  family  circle, 
it  is  certain  that,  within  that  circle,  the  passions  else- 
where predominant  were  restrained  by  sentiments  of 
affection ;  and  in  this  we  have  the  germ  of  a  series  of 
most  important  phenomena.  In  this  case  love  toward 
relatives  and  enmity  toward  neighbors  are  the  ruling 
motives.  The  differing  motives  dictate  opposite  lines 
of  conduct.  Reflection  serves  to  define  and  formulate 
the  two  opposite  modes  of  action ;  that  which  is  cus- 
tomary in  the  treatment  of  relatives  and  that  which  is 
characteristic  in  the  treatment  of  enemies  come  to  be 
understood  and  recognized,  and  a  rude  code  of  rules  is 
formed  for  the  guidance  of  numbers  of  the  favored 
circle  in  their  treatment  of  each  other.  Gradually, 
from  the  depths  of  a  nascent  faculty  of  reason,  a  deeper 
intuition  than  any  yet  experienced  comes  to  lay  its 
sanction  on  the  code  which  family  affection  and  custom 
have  established.  In  the  vivid  picture-language  of 
Genesis,  the  fruit  of  "  the  tree  of  knowledge  of  good  and 
evil "  is  plucked.  A  rude  perception  of  right  and  wrong 
is  attained.  The  glimmering  light  of  a  moral  principle 
that  is  to  direct  the  development  of  the  race  makes 
itself  for  the  first  time  perceptible,  and  the  troglodyte 
is  no  longer  as  an  animal,  innocent  because  ignorant, 
but  "as  a  god,  knowing  good  and  evil."  Such  is, 


THE    ETHICS    OF    TRADE.  153 

perhaps,  the  teaching  of  Genesis  and  the  guess  of 
science  concerning  the  origin  of  moral  influences  in 
human  society. 

The  code  of  right  and  wrong  is,  at  first,  confined  to 
the  family  ;  but  in  time  sufficiently  close  intercourse  is 
established  between  neighboring  families  to  develop 
common  ideas  of  right  and  wrong  in  matters  pertaining 
to  a  larger  circle,  and  the  moral  code  extends  itself  to 
the  neighborhood.  Neighborhoods  unite  into  tribes, 
and  the  process  repeats  itself.  In  time  the  final  step 
is  taken ;  the  moral  code  receives  the  sanction  of  a 
legal  enactment,  with  penalties  for  violation,  and  is 
thus  enabled  to  exert  its  greatest  influence.  The 
competitive  system  has  now  received  definite  limita- 
tions within  the  circle  where  the  ethical  influences  are 
exerted. 

The  growth  of  these  influences,  in  both  an  extensive 
and  an  intensive  way,  is  a  matter  of  history.  They 
have  grown  extensively  as  tribes  have  united  into 
nations,  and  as  nations,  by  the  development  of  inter- 
national law,  have  taken  on  the  rudimentary  form  of 
what  promises  to  be  a  world  state,  an  organic  unity 
bounded  by  no  narrower  limits  than  those  of  the  globe 
we  inhabit.  There  is  no  quarter  of  the  world,  at 
present,  unreached  by  ethical  influences,  and  none, 
consequently,  where  the  competitive  impulse  is  not 
subject  to  some  limitations. 

Intensively  these  moral  forces  have  grown  with  general 


154  THE  ETHICS   OF   TRADE. 

civilization,  acquiring,  within  a  given  local  circle,  a 
constantly  increasing  power,  and  restricting  the  wealth- 
getting  process  more  and  more.  The  crude  competi- 
tion which  spared  neither  life  nor  limb  gave  place  to 
a  method  which  respected  the  lives  of  the  contestants ; 
murder,  as  an  economic  process,  was  prohibited,  while 
robbery  was  still  tolerated.  Human  bodies  were  first 
excluded  from  the  list  of  articles  to  be  competed  for. 
It  was  a  sort  of  legal  exemption,  the  first  and  most 
beneficent  of  homestead  laws.  The  dwelling  which 
the  soul  of  man  inhabits  might  not  be  seized  by  his 
creditors  and  the  occupant  ejected. 

A  farther  moral  development  extended  the  protec- 
tion of  the  law  to  outward  possessions,  suppressing  first 
open  robbery,  and  then  obvious  fraud,  and  extending 
its  influence  ultimately  to  those  refined  forms  of  coer- 
cion and  deceit  of  which  a  large  survival  remains  to 
be  dealt  with. 

From  the  time  when  the  institution  of  property  was 
put  upon  a  moral  basis  the  nature  of  the  competitive  pro- 
cess changed.  In  the  primitive  state  it  was  a  struggle  to 
secure  a  de  facto  possession ;  in  the  civilized  state  it  is 
a  struggle  to  secure  lawful  possession.  This  is  possible 
only  by  creating  something  of  value,  or  by  receiving  it 
from  a  previous  owner  by  a  voluntary  cession.  Useful 
articles  are  not  relinquished  without  an  inducement; 
and  here  is  the  basis  of  the  system  of  exchanges  which 
is  the  distinctive  phenomenon  of  civilized  society. 


THE   ETHICS   OF   TRADE.  155 

Those  who  desire  an  article  of  value  must  seek  to 
outdo  each  other  in  offering  to  its  possessor  induce- 
ments to  part  with  it.  Rivalry  in  giving  is,  therefore, 
the  essence  of  legitimate  competition.  It  is  the  func- 
tion of  moral  influences  to  see  to  it  that  the  process 
retains  this  character;  it  is,  in  fact,  constantly  losing 
it,  and  lapsing  into  the  cruder  state.  The  refinements 
of  force  and  fraud  which  are  beyond  the  reach  of 
statute  law,  are  still  used  in  securing  de  facto  posses- 
sion without  moral  right.  Competition,  in  the  new  era, 
is  indeed  debarred  from  certain  extensive  fields ;  but 
in  others  it  survives,  and  it  is  of  vital  importance  that 
its  methods  be  made  legitimate. 

Sir  Henry  Maine  has  shown  that  the  family  system, 
which  excluded  competition  entirely,  extended  itself 
to  the  village  community,  which  was  the  germ  of 
the  modern  state.  Within  the  village  all  relations 
were  fraternal,  and  property  was  held  largely  in  com- 
mon ;  while  on  the  mark,  or  boundary,  the  germ  of  the 
modern  market,  the  relations  were  somewhat  hostile. 
It  was  on  the  mark  that  members  of  different  com- 
munities met  to  buy  and  sell.  Here  they  were  free 
from  the  moral  influences  which  existed  among  mem- 
bers of  the  same  community,  and  mercantile  processes 
were,  therefore,  relatively  unrestrained.  Here  there 
was  "  higgling,"  the  contention  between  buyers  and 
sellers ;  though  there  was  but  little  of  that  true  com- 


156  THE   ETHICS    OF   TRADE. 

petition,  the  rivalry  in  giving,  which  is  the  character- 
istic of  modern  trade. 

The  highly  developed  family  code  acquired  its 
greatest  field  of  action  in  the  mediaeval  village. 
The  local  circle  within  which  mercantile  action  is 
excluded  has  been  reduced  to  a  zero  ;  -but,  in  com- 
pensation, much  of  the  humanity  which  characterized 
the  dealings  of  villagers  with  each  other  has  extended 
itself  to  all  members  of  society  in  their  non-mercantile 
relations.  The  mark,  as  such,  is  now  extinct ;  and, 
in  western  countries,  the  village  community  is  so. 
Modern  society  consists  of  a  fusion  of  the  two,  and 
bears  the  stamp  of  each  of  the  elements  that  com- 
pose it.  In  some  of  its  activities  the  modern  com- 
munity resembles  the  mark ;  in  others  it  resembles 
the  village.  This  dualism  is  most  apparent  and  most 
harmful  in  the  domain  of  practical  morals. 

The  tribal  conscience  formerly  developed  fine  sensi- 
bilities ;  the  inter-tribal  conscience  was  cruder,  and 
tolerated  mercantile  contention  and  the  recognized 
"  tricks  of  trade."  The  man  of  the  present  day  is 
actuated,  now  by  one  influence,  and  now  by  the 
other,  and  has  two  distinct  codes  of  outward  conduct. 
Moral  philosophy,  indeed,  teaches  that  his  fundamental 
character  is  one  and  unchanging ;  but  as  there  is  one 
code  of  practical  conduct  for  peace  and  another  for 
war,  so  there  is  one  code  for  the  family,  the  social 
circle,  and  the  church,  and  a  different  one  for  mercan- 


THE  ETHICS   OF   TRADE.  157 

tile  life.  The  man  of  business  is  constantly  passing 
from  the  jurisdiction  of  the  one  code  to  that  of  the 
other.  Even  the  laws  of  war  are  improving,  with  the 
general  growth  of  moral  influences ;  and  the  quasi- 
martial  laws  of  trade  are  subject  to  similar  improve- 
ment. Progress  in  this  respect  is  not  uniform  ;  there 
are  periods  when  it  is  checked  by  the  action  of  sharp 
competition.  From  such  a  period  we  are  now  emerg- 
ing, and  a  reformation  of  the  morals  of  trade  affords 
the  chief  hope  of  a  better  industrial  condition. 

It  is  a  common  remark,  that  business  practices  are 
not  what  they  should  be,  and  that  a  sensitive  con- 
science must  be  left  at  home  when  its  possessor  goes 
to  the  office  or  the  shop.  We  helplessly  deprecate  this 
fact ;  we  lament  the  forms  of  business  depravity  that 
come  to  our  notice,  but  attack  them  with  little 
confidence.  We  are  appalled  by  the  great  fact  of 
the  moral  dualism  in  which  we  live,  and  are  inclined 
to  resign  ourselves  to  the  necessity  of  a  twofold  life. 
We  do  not  realize  that  moral  influences  have  for 
their  particular  and  legitimate  function  to  suppress 
the  remnants  of  natural  ferocity  which  show  them- 
selves in  the  economic  dealings  of  man  with  man ; 
neither  do  we  realize  how  radical  would  be  the  effect 
of  a  comparatively  slight  reformation  in  this  direction. 
Religion  has  held  itself  too  much  aloof  from  this 
particular  work;  and  so  effectual  has  been,  at  times, 
the  separation  of  religious  life  from  business  life  that 


158  THE  ETHICS   OF   TRADE. 

seeming  piety  has,  in  too  many  cases,  been  consistent 
with  business  meanness.  Such  is  the  bitter  moral 
fruit  of  the  competitive  system. 

It  was  the  effort  of  mediaeval  times  to  secure,  by 
public  sentiment  and  by  positive  statutes,  a  reign  of 
just  prices  in  all  commercial  dealings.  This  precluded, 
to  a  great  extent,  the  effort  of  rival  sellers  of  com- 
modities to  secure  custom  for  themselves  by  offering 
their  products  for  less  than  the  established  rates.  Simi- 
lar causes  repressed  competition  in  the  labor  market. 
Yet  it  is  not  true  that  the  competitive  principle  was 
not  then  in  action.  In  legislating  to  enforce  just 
prices,  the  law-makers  had  a  criterion  for  determining 
what  was  just.  Custom,  in  the  main,  furnished  this 
criterion,  and  this  was  itself  determined  by  a  certain 
latent  and  unconscious  process  of  competition.  If  the 
rule  of  just  prices  were  to  be  introduced  at  present, 
and  open  rivalry  in  buying  and  selling  suppressed, 
there  would  still  be  need  of  the  criterion  of  justice, 
and  the  latent  competition  would  again  have  its  work 
to  do.  The  ethico-economic  fact  of  the  mediaeval 
period,  and,  let  us  hope,  of  the  coming  period,  is  the 
recognition  of  the  duty  of  all  to  conform  to  the 
standard  of  justice  thus  established. 

From  the  mediaeval  stage  competition  has  developed 
through  two  distinct  conditions.  The  former  of  these 
is  that  in  which  law  of  just  prices  still  rules  in  trans- 
actions outside  of  the  general  market,  but  in  which 


THE  ETHICS  OF  TRADE.  159 

the  attempt  to  control  the  market  itself  by  moral  or 
statutory  regulations  is  abandoned.  Within  the 
theatre  of  general  exchanges  the  standard  is  set  by 
the  undisguised  efforts  of  many  persons  to  outdo 
each  other  in  offering  products  to  society  as  the 
general  consumer.  Turn  the  market  into  a  general 
auction ;  let  sellers  do  their  best  in  underbidding 
each  other  in  price,  which  is  overbidding  in  service 
rendered;  note  the  results  in  the  prices  current,  and 
then  abide  by  them  in  separate  individual  dealings; 
such  is  the  mercantile  code  in  the  second  stage  of 
development. 

This  code  is  imperfectly  obeyed ;  and,  as  violations 
of  it  become  frequent,  they  react  on  the  ethical  rule 
itself.  The  third  stage  of  competitive  development  is 
characterized  by  the  gradual  abandonment  of  the  rule 
which  requires  that  the  individual  should,  in  isolated 
transactions,  conform  to  market  standards.  The  new 
practice  allows  a  man  to  get  what  he  can  by  trade, 
under  any  and  all  circumstances.  The  system  becomes 
as  undisguisedly  predatory  as  one  can  be  without 
violating  the  rights  of  property  in  actual  possession. 
The  man  who  buys  for  less  than  the  market  price  or 
sells  for  more  is  held  to  have  done  a  creditable 
action. 

The  theory  of  the  modern  bargain  appears  to  be 
that  of  the  mediaeval  judicial  combat:  let  each  do  his 
worst,  and  God  will  protect  the  right.  As  in 


160  THE  ETHICS   OF   TRADE. 

mediaeval  times  providence  has  often  protected  the 
wrong,  and,  by  this  means,  revealed  the  abominations 
of  the  system.  There  is  a  standard  which  determines 
the  justice  or  injustice  of  bargains  ;  and  though  the 
"  higgling  of  the  market "  in  which  competition  is 
general  secures  a  rude  conformity  to  that  standard, 
that  which  takes  place  between  a  buyer  and  a  seller 
isolated  from  competitors  stands  in  no  relation  to 
it.  Here  is  a  chief  seat  of  business  depravity.  The 
Scriptures  are  full  of  references  to  unjust  bargaining; 
ancient  law-givers  attacked  it;  the  codes  of  the  mid- 
dle ages  endeavored  to  suppress  it,  but  moralists  of 
recent  years  have  sighed  and  resigned  themselves  to 
wait  a  geological  era  for  moral  influences  to  become 
strong  enough  to  uproot  the  evil.  It  has  been 
entrenched  in  the  competitive  system ;  with  recent 
changes  in  that  system  it  has  become  open  to 
attack.  If  there  is  an  intelligible  law  determining 
the  moral  quality  of  business  dealings,  it  is  time  that 
it  were  universally  taught  and  a  just  standard 
enforced. 

Wealth  is  legitimately  acquired  by  the  operation  of 
production,  not  by  that  of  exchange.  We  have  already 
endeavored  to  draw  the  line  where  production  termi- 
nates. An  exchange  made  at  rates  current  in  an  open 
market  makes  neither  party  richer ;  it  is  mutually  ad- 
vantageous and  morally  commendable.  A  bargain 
which  enriches  one  party  at  the  expense  of  the  other 


THE   ETHICS   OF   TRADE.  161 

must  deviate,  in  its  terms,  from  current  standards. 
Money-making  by  exchange  is  virtual  robbery,  and  is 
only  prevented  from  being  legal  robbery  by  the  imper- 
fection of  the  law. 

Intelligent  persons  do  not  need  to  be  told  that  deal- 
ing in  commodities  as  the  merchant  deals  in  them  is  an 
operation  which  falls,  scientifically,  under  the  head  of 
production.  The  merchant  creates  form  utility,  place 
utility,  and  time  utility;  and  his  reward  is  as  legitimate 
as  that  of  any  other  producer.  He  has  numerous  op- 
portunities for  passing  beyond  his  normal  function,  and 
acquiring  wealth  by  exchange ;  but  this  is  always  by 
unfair  dealing.  If  he  buys  in  gross,  sells  in  detail,  and 
gives  honest  goods  for  an  honest  price,  he  is  as  much  a 
producer  as  a  farmer  or  an  artisan. 

It  is  the  shrewd  trading  men  who  create  no  wealth, 
but  deal  in  stocks,  produce,  real  estate,  horses,  etc.,  in 
a  manner  that  benefits  no  one  but  themselves,  that 
furnish  the  best  illustrations  of  money-making  by  the 
operation  of  exchange.  Market  prices  are  nothing  to 
such  men ;  it  is  their  aim  to  get  more  value  than  they 
give,  both  in  buying  and  in  selling.  As  this  is  not  easy 
when  the  parties  with  whom  they  deal  are  aware  of  the 
value  of  the  property  to  be  transferred,  it  comes  to  pass 
that  lying  is  a  frequent  part  of  the  process.  The  mer- 
cantile lie  is  the  chief  modern  instrument  for  getting 
wealth  without  creating  it.  The  falsehood  had  better 
not  be,  in  most  cases,  bald  and  obvious  ;  it  would  then 


162  THE  ETHICS   OF  TRADE. 

be  a  crude  instrument  ill  adapted  to  modern  uses.  It 
needs  to  be  a  refined  product,  adapted  to  the  system 
of  which  it  is  a  part. 

What  is  ordinarily  termed  a  good  bargain  is,  morally, 
a  bad  bargain.  It  is  unequal,  and  good  for  one  party 
only.  Whenever  such  a  transaction  takes  place,  some 
one  is  plundered.  We  should  term  a  purchase  or  a 
sale  good  only  when  it  conforms  to  the  standard  of 
equity ;  we  actually  call  it  so  when  it  departs  from  that 
standard,  and  we  gauge  its  goodness  by  the  amount  of 
the  departure.  It  is  the  sufferer  by  such  a  transaction 
who  usually  regrets  it;  in  an  ideal  society  it  would 
be  the  gainer  who  would  mourn.  Sackcloth  and 
ashes  are  the  proper  covering  of  the  man  who  has  made 
a  good  bargain.  What  is  the  fact  in  the  case  ?  Do  the 
men  who  have  gained  something  by  this  questionable 
means  don  the  garments  of  humiliation?  Do  they  feel 
shame,  or  complacency?  Are  they  disposed  to  conceal 
their  action,  or  to  boast  of  it  ?  Are  they,  in  fact,  treated 
with  less  honor  by  other  men,  or  with  more?  The 
whole  process  is  bad;  it  is  odious,  and  the  worst  fea- 
ture of  it  is  that  it  is  characteristically  American. 

The  sharp  bargaining  spirit  which  seeks  to  get 
wealth  away  from  its  possessors  by  all  methods  toler- 
ated by  law,  is  characteristic  of  the  degenerate  days 
of  the  competitive  system.  Moral  influence  is  more 
powerful  and  pervasive  in  America  than  in  most 
countries;  and  if  public  sentiment  among  us  renders 


THE   ETHICS    OF   TRADE.  163 

sharp  trading  respectable,  it  is  due  to  the  fact  that 
competition  has  degenerated  earlier  here  than  else- 
where. 

The  man  who,  in  Germany,  France,  or  England, 
should  go  from  shop  to  shop  to  find  whose  prices  were 
the  lowest  would  be,  if  not  turned  out  of  doors,  at 
least  treated  in  such  a  manner  that  he  would  go,  and 
not  return.  A  certain  survival  of  the  mediaeval  code, 
the  tradition  of  a  time  when  the  just  price  was  the 
legal  rule,  has  prevented  the  men  of  these  countries 
from  living  up  to  the  logic  of  the  competitive  system 
in  its  final  stage.  In  America  we  are  more  consis- 
tent; we  accept  the  results  of  a  degenerate  compe- 
tition, greatly  to  the  detriment  of  our  morality. 
Trade  is  actually  held  in  greater  honor  here  than  else- 
where, and  it  deserves  to  be  held  in  less ;  a  part  of 
our  respect  for  it  is  due  to  our  peculiar  blindness  to 
its  defects.  Let  us  withhold  our  respect  until  it  is 
due,  and,  that  we  may  justly  honor  trade,  let  us  make 
it  honorable. 

A  perfect  ideal  of  character  and  conduct  usually 
serves  the  purpose  rather  of  a  beacon  than  of  a  goal. 
Like  the  star  toward  which  the  sailor  steers,  it  is  a 
thing  never  to  be  reached,  but  only  distantly  ap- 
proached. Yet  the  pilot  who  depends  on  a  star  for 
direction  is  in  peril  of  life  if  he  loses  sight  of  it ;  and 
something  similar  to  this  is  true  of  a  society  which 
loses  from  view  its  moral  ideal.  No  fog  ever  baffled 


164  THE   ETHICS   OF   TRADE. 

a  sailor  more  completely  than  the  dual  code  of  moral- 
ity, the  outgrowth  of  a  degenerate  mercantile  system, 
has  blinded  and  baffled  the  people  of  this  country. 
The  true  standard  of  business  dealing  has  been  hid  ; 
it  needs  to  be  brought  to  the  light  and  placed  where 
all  may  see  it.  Though  it  were  never  reached,  it 
would  make  all  the  difference  between  success  and 
failure,  if  our  course  could  be  turned  toward  it  instead 
of  from  it. 

The  changes  now  in  progress  make  it  possible  to  do 
more  than  to  gaze  at  the  moral  ideal  of  trade  from  a 
hopeless  distance,  or  even  to  somewhat  lessen  the 
gulf  that  separates  us  from  it.  Moral  force  is  to 
work,  hereafter,  from  a  new  vantage-ground.  There 
is,  moreover,  among  the  multitude  of  those  whose 
occupations  are  wholly  legitimate,  and  whose  con- 
sciences are  not  blinded  by  the  false  mercantile  code 
that  has  begun  to  prevail  among  us,  a  moral  energy 
amply  adequate  to  accomplish  the  reformation  of  our 
business  system,  could  the  true  principles  of  practical 
ethics  be  generally  taught  and  accepted. 

One  form  of  business  immorality  is  very  radical  in 
its  effects,  and  the  removal  of  it  would  be  more  than 
a  palliative  for  existing  social  evils  ;  it  would  be,  to  a 
great  extent,  curative.  The  evil  is  the  most  savage 
form  of  competitive  action  tolerated  by  law.  Much 
of  our  bargaining  is  a  refinement  of  fraud;  this  is  a 
refinement  of  highway  robbery.  It  is  a  survival  of 


THE   ETHICS    OF    TRADE.  165 

troglodyte  economy,  though  its  methods  are  adapted 
to  the  civilized  state.  The  aim  of  the  practice  is  to 
get  property  by  force  from  weak  possessors.  The 
weapon  used  is  not  the  club  of  the  cave-dweller;  it 
is  unnecessary  to  kill  the  victim ;  it  is  only  necessary 
to  present  to  him  an  alternative  so  hard  as  to  compel 
him  to  relinquish  his  possessions.  The  matching  of 
strength  against  weakness  is  contrary  to  fighting  codes ; 
equal  armor  and  equal  weapons  were  the  rule  of 
knighthood.  The  mercantile  code  permits  any  amount 
of  inequality  of  outfit.  We  need  a  revival  of  the  old 
German  sense  of  honor;  and  especially  and  particu- 
larly do  we  need  a  little  of  that  chivalrous  spirit 
which  protected  women  and  children  in  mediseval 
times.  It  is  one  of  the  enigmas  of  modern  life  that 
the  literal  striking  of  a  woman,  however  lightly,  should 
brand  the  offender  as  a  social  outcast,  while,  in  an 
economic  way,  the  deadliest  blows  may  be  struck  at 
her  with  impunity ;  and  that  society  even  honors  men 
who  get  rich  by  such  unknightly  attacks  on  the  de- 
fenceless. The  modern  sense  of  personal  honor  is, 
like  the  modern  standard  of  morality,  dualistic. 

Special  exigencies  often  render  particular  persons 
unable  to  bargain  on  equal  terms  with  those  with 
whom  they  are  dealing.  They  may  be  compelled  to 
sell  something  immediately,  and  the  urgency  of  the 
case  may  allow  no  time  to  seek  more  than  one  pur- 
chaser. They  are,  for  the  time  being,  excluded  from 


166  THE   ETHICS   OF    TRADE. 

any  general  market.  In  this  case,  as  in  most  cases, 
freedom  unqualified  by  law  is  not  freedom,  but  li- 
cense. The  commercial  code  which  authorizes  a  trader 
to  depart  from  the  standards  furnished  by  the  gen- 
eral market  gives  him,  as  it  were,  letters  of  marque, 
authorizing  him  to  prey  upon  the  weak  at  will. 

A  borrower,  in  special  exigencies,  is  often  at  the 
mercy  of  a  single  lender.  A  merchant  who  is  in  any 
danger  of  failing  in  business  is  often  compelled  to 
accept  the  offer  of  a  single  customer.  A  land-owner 
who  cannot  pay  his  mortgages  is  often  compelled  to 
accept  what  a  single  purchaser  may  choose  to  offer ; 
and  men  are  numerous  enough  whose  business  it  is 
to  create  and  to  utilize  such  exigencies.  The  actual 
creation  of  the  exigencies  is  most  frequently  the  busi- 
ness of  the  operator  in  the  stock  exchange  or  the  pro- 
duce exchange ;  but  the  utilizing  of  them  is  common 
enough  everywhere.  It  is  the  baldest  of  robbery,  and 
is  all  the  worse  because  the  law  cannot  reach  it  effec- 
tively. The  result  of  recent  movements  is  to  lessen 
the  field  for  it,  and,  with  public  sentiment  acting  in 
the  right  direction,  we  may  hope  for  the  correction 
of  the  evil. 

In  other  than  financial  exigencies  the  true  princi- 
ple is  clearly  enough  recognized.  A  boatman  does 
not  stop  to  make  terms  with  a  man  in  the  water  be- 
fore taking  him  on  board.  A  ship's  captain  does  not 
settle  the  question  of  salvage  before  taking  the  crew 


THE   ETHICS   OF    TRADE.  167 

from  a  wreck.  They  render  the  service  without  ques- 
tion, and  collect  the  equitable  reward  afterwards. 
Society  demands  the  prompt  rendering  of  the  service ; 
the  refusal  to  render  it  is  a  crime,  and  the  making  of 
conditions  is  a  temporary  refusal.  The  boatman  who 
bargains  with  a  sinking  man,  virtually  says  to  him,  "  I 
now  refuse  to  rescue  you,  but  will  change  my  mind  if 
you  will  give  me  a  certain  sum.  My  refusal  to  rescue 
you  is  equivalent  to  drowning  you,  and  I  shall  drown 
you  unless  you  give  me  some  something  to  which  I 
have  no  equitable  claim."  It  is  the  position  of  the 
highwayman ;  and  the  same  is  true  of  those  who  utilize 
financial  exigencies  in  the  same  way.  Financial 
drowning  brings  ruin  to  families,  and  is  sometimes  as 
much  worse,  in  its  effects,  than  literal  drowning,  as 
the  slow  starvation  of  many  persons,  or  their  intellec- 
tual and  moral  ruin,  is  worse  than  the  quick  death 
of  one  person.  The  moral  and  legal  principle  is  the 
same  in  both  cases,  and  should  be  equally  recognized 
and  obeyed. 

It  is  too  much  to  expect  that  persons  whose  nature 
prompts  them  to  a  predatory  commercial  life  will  change 
their  practices  while  the  field  continues  open  for  them. 
The  hope  for  a  radical  change  in  this  department 
of  business  ethics  lies  partly  in  the  fact  that  the 
field  is  no  longer  clear  for  the  worst  practices  which 
the  competitive  system  has  developed.  Where  a 
mercantile  freebooter  gains  an  advantage  by  the 


168  THE    ETHICS    OF    TRADE. 

methods  above  described,  his  rivals  feel  compelled 
to  adopt  them,  against  the  protest  of  their  moral 
nature,  and  competition  tends  to  level  the  mercantile 
community  downward  to  the  moral  standard  which 
proves  most  profitable.  It  is  a  very  ordinary  honesty 
which  is  the  best  policy,  in  a  time  of  unscrupulous 
competition. 

The  chief  bearing  of  these  principles  is  upon  the 
labor  questions  of  the  day.  Workmen  have  hereto- 
fore been  the  most  frequent  victims  of  predatory 
competition.  Large  numbers  of  them  have  been  practi- 
cally confined  to  one  employer,  as  a  customer  for  that 
which  they  have  had  to  sell.  Their  exigency  has  often 
been  extreme,  and  their  relations  to  each  other  such 
that,  when  cases  of  extreme  need  have  occurred,  the 
effect  has  been  diffused  over  the  entire  number. 
Not  only  the  few  whose  necessities  have  compelled 
them  to  accept  whatever  was  offered,  but  the  entire 
class  which  they  represent,  have  been  liable,  at  such 
times,  to  have  their  wages  lowered.  It  is,  as  a  rule, 
by  means  of  a  few  exceptional  cases  that  the  extreme 
results  of  unbalanced  competition  are  suffered  by  the 
laboring  class ;  and  it  takes  place  by  a  process  of 
rotation,  in  which,  at  every  step,  advantage  is  taken 
by  some  one  of  isolated  cases  of  distress. 

A  few  persons  are  at  first  crowded  out  of  employ- 
ment ;  a  brief  period  suffices  to  reduce  these  to  a 
condition  where  they  must  accept  anything  which 


THE   ETHICS    OF    TRADE.  169 

may  be  offered  for  their  labor.  If  some  one  who  is 
on  the  watch  for  such  opportunities  now  offers  them 
half  the  prevailing  rate,  and  they  accept  it,  the  effect 
may  be  to  displace  others,  and  to  reduce  them  also, 
by  the  hunger  argument,  to  a  willingness  to  accept  a 
similar  reduction.  The  process  may  be  repeated 
indefinitely,  until,  in  the  end,  general  wages  are 
correspondingly  reduced.  The  many  benevolent  em- 
ployers who  engage  in  the  procedure  with  reluctance 
are  driven  to  it  by  the  competition  of  others.  A  few 
men  without  employment,  and  a  few  employers  with- 
out souls,  are  the  conditions  of  a  general  reduction 
of  wages  below  the  point  to  which  more  legitimate 
causes  would  reduce  them.  Unemployed  men  and 
soulless  employers  always  exist  somewhere.  It  was 
stated,  in  the  interest  of  railroad  managers,  at  the 
time  of  the  general  strike  of  1877,  that  the  places 
of  the  strikers  could  all  have  been  filled,  at  the 
reduced  rate  which  was  then  offered  ;  and  it  was  on 
this  supposition  that  much  denunciation  was  expended 
on  the  leaders  of  the  movement.  On  general  prin- 
ciples the  statement  is  very  improbable.  The  vacan- 
cies could  have  been  filled,  had  they  occurred  a  few 
at  a  time,  by  the  process  of  rotation  above  described ; 
but,  after  the  changes  had  taken  place,  it  would  have 
been,  to  a  great  extent,  the  same  men  who  would 
have  been  found  in  the  positions.  A  few  at  a  time 


170  THE    ETHICS    OF    TRADE. 

they  would    have    left  their    employment,  suffered  for 
a  while,  and  returned  to  their  work. 

This  rapid  rotation,  whereby  large  classes  are 
reduced  to  a  rate  of  wages  lower  than  that  at 
which  they  can  permanently  live,  lower  than  any  to 
which  legitimate  causes  would  need  to  reduce  them, 
is  the  only  means  whereby,  in  a  country  like  ours, 
the  extreme  results  of  Ilicardo's  principle  can  be 
realized.  It  has  never,  in  our  actual  experience, 
been  realized.  We  have  seen  wave  after  wave  of 
competition,  sharper  than  that  which  exists  in  other 
countries,  sweep  over  the  industrial  classes,  begin- 
ning with  retail  dealers,  and  extending  itself  to 
wholesale  dealers  and  manufacturers,  until  it  has 
reached  the  laboring  class,  and  spent  its  accumulated 
strength  upon  them.  Yet  wages  have  rebounded, 
after  each  depression,  to  a  level  above  that  which 
is  maintained  in  conservative  countries.  The  cause 
is  obvious,  —  our  vacant  lands.  Competition  cannot 
starve  men  while  free  farms  are  waiting  for  them. 
Yet  thoughtful  men  must  have  realized  that  the  reward 
of  labor  in  this  country  has  not  been  as  much  above 
that  which  has  elsewhere  prevailed  as  our  resources 
would  have  warranted.  Something  must,  in  a  meas- 
ure, have  neutralized  our  advantages ;  and,  while 
causes  like  an  excessive  tariff  will  occur  to  every 
one,  a  part  of  the  effect  must  be  attributed  to  the 
sharply  competitive  spirit  of  our  people.  Labor- 


THE   ETHICS    OF   TRADE.  171 

unions  have  been  late  in  developing,  and  unbalanced 
competition,  under  a  low  code  of  commercial  ethics, 
has  produced  its  natural  effects. 

Free  homesteads  of  good  quality  are  no  longer  to 
be  had ;  and  this  fact  radically  changes  the  industrial 
situation.  It  lessens  the  product  to  be  divided  be- 
tween employers  and  workmen,  and  it  modifies  the 
terms  of  the  division.  We  must  depend  on  new 
influences,  in  both  directions,  in  the  era  which  is 
coming.  If  the  product  of  industry  is  materially 
lessened,  no  readjustment  of  the  terms  of  division 
between  labor  and  capital  can  make  good  the  work- 
man's loss.  The  influence  tending  to  make  industry 
productive  we  shall  later  examine ;  that  which  favor- 
ably affects  the  terms  of  distribution  is  not  merely 
the  consolidation  of  labor,  but  that  movement  followed 
by  the  moral  development  for  which  it  opens  the  way. 
The  solidarity  of  labor  calls  imperatively  for  arbitration, 
in  the  adjustment  of  its  claims,  and  accustoms  the  public 
mind  to  accept  a  standard  of  wages  determined  by  jus- 
tice rather  than  force.  Within  broad  limits  it  puts  a 
definite  stop  to  the  predatory  methods  which  com- 
petition has  developed.  Soulless  employers  can  no 
longer  use  a  few  unemployed  men  as  a  lever  with 
which  to  reduce  the  wages  of  an  entire  class.  The 
process  of  rotation,  by  which  this  has  been  possible, 
is  precluded  by  the  establishment  of  strong  trades- 
unions.  The  pecuniary  effect  of  this  change  is  of  im- 


172  THE    ETHICS    OF    TRADE. 

portance  to  laborers ;  the  moral  reaction  which  it 
occasions  is  of  incalculable  value  to  employers.  Their 
better  impulses  may  now  assert  themselves.  The 
employer  who  has  long  been  willing  to  pay  fair 
wages,  but  has  been  unable  to  do  so  because  of  his 
neighbor's  competition,  is  relieved  from  his  dilemma. 
The  necessity  which  compelled  him  to  stille  his  con- 
science is  changed  to  a  coercion  forcing  him  to  obey 
it ;  and  while  right  conduct  under  compulsion  may 
not  redeem  him  in  the  eyes  of  the  moralist,  it  removes 
a  blight  from  his  business  life,  and  makes  a  truly  moral 
development  possible.  To  society  as  a  whole  the 
changes  incident  to  the  altered  relations  of  employers 
and  workmen  involve  a  change  of  organic  character. 
The  present  interval  is  morally  transitional.  The 
relaxing  of  healthy  restraints,  the  growth  of  mercan- 
tile license,  has  characterized  the  period  now  closing. 
Trade  has  become  openly  predatory,  and  the  weak 
have  been  the  victims.  The  field  for  such  practices 
has  been  partly  closed,  but  the  code  which  jus- 
tified them  has  not  been  abandoned.  \Ve  are  in  dan- 
ger of  importing  into  the  new  era  the  ethics  of  the 
old.  It  would  be  the  anomaly  of  old  wine  in  new 
bottles,  the  spirit  of  a  decayed  system  surviving  after 
its  forms  had  been  renewed.  With  the  growth  of  new 
processes  of  distribution,  with  arbitration  and  the 
various  forms  of  industrial  partnership,  a  better  ethical 
code  must  assert  itself.  Justice  in  the  division  of 


THE   ETHICS    OF    TRADE.  173 

products,  equality  in  exchanges,  must  become  the  aim 
of  social  effort.  The  gain  will  be  both  material  and 
moral ;  the  change  which  makes  workmen  richer  will 
make  all  classes  better ;  and  what  is  of  more  impor- 
tance, it  will  open  the  way  for  continued  progress. 
Wages  may  sometimes  be  low,  but  not  because  of 
an  eternal  downward  tendency;  and  the  death-line 
as  a  natural  limit  will  forever  disappear.  The 
law  which  condemned  society,  as  an  organic  whole, 
to  a  career  of  brutality  will  be  changed  to  a  law 
which  will  open  before  it  a  continuous  growth  in 
righteousness. 

NOTE.  —  The  foregoing  theory  of  business  ethics  does  not  condemn 
speculation  as  such.  To  buy  articles  when  they  are  cheap  with  a 
view  to  selling  them  when  they  are  dearer,  is  to  acquire  wealth  by 
accretions  of  time  utility,  as  indicated  in  Chapter  II.  The  theory 
condemns  the  manipulating  of  temporary  prices  by  virtual  force  or 
fraud;  but  the  form  of  immorality  to  which  it  refers  as  characteristic 
of  a  degenerate  system  is  that  which  appears  in  the  dealings  of  one 
individual  with  another,  and  which  consists  in  using  refinements  of 
force  or  fraud  in  such  a  manner  as  to  effect  unequal  exchanges.  The 
standard  of  equity  in  the  purchase  and  sale  of  commodities  is  deter- 
mined by  the  normal  action  of  demand  and  supply  in  an  open  market. 


CHAPTER   X. 

THE  PRINCIPLE   OF   COOPERATION. 

HISTORY  has  lately  been  said  to  move  in  cycles  and 
epicycles ;  its  phenomena  tend  to  recur  at  intervals,  in 
regular  succession.  An  anarchic  condition  may  be  fol- 
lowed by  despotism,  that  by  democracy,  and  that  again 
by  anarchy;  yet  the  second  anarchy  is  not  like  the  first; 
and  when  it,  in  turn,  yields  to  despotism,  that  also  is 
different  from  the  former  despotism.  The  course  of 
history  has  been  in  a  circle,  but  it  is  a  circle  whose 
centre  is  moving.  The  same  phenomena  may  recur 
indefinitely;  but  at  each  recurrence  the  whole  course  of 
events  will  have  advanced,  and  the  existing  condition 
will  have  its  parallel,  though  not  its  precise  duplicate, 
in  some  previous  condition.  There  is  nothing  perma- 
nent in  history,  and  there  is  nothing  new.  That  which 
is  will  pass  away,  and  that  which  will  take  its  place  will 
be  like  something  that  has  already  existed  and  passed 
away.  History  moves,  like  the  earth,  in  an  orbit ;  but, 
like  the  earth,  it  moves  in  an  orbit  the  centre  of  which 
is  describing  a  greater  orbit. 

That  any  particular  condition  has  existed  in  the  past, 
and  has  passed  away,  is  no  evidence  that  it  will  not 
return,  but  is  rather  an  evidence  that  it  will  return, 


THE   PI1INCIPLE   OF    JOOPERAT1ON.  175 

though  in  a  different  form.  That  village-communities 
working  on  a  cooperative  plan  existed  in  the  Middle 
Ages,  and  that  something  resembling  them  existed  in 
antiquity,  is,  as  far  as  it  goes,  an  evidence  that  industrial 
cooperation  will  return,  though  in  a  form  adapted  to  its 
new  surroundings.  That  a  fraternal  spirit  prevailed 
where  this  plan  was  in  operation,  and  that  justice  rather 
than  force  presided  over  the  distribution  of  wealth, 
affords  some  evidence  that  this  moral  force  will  do  a 
similar  work  in  the  modern  world.  Productive  property 
owned  in  undivided  shares  by  laboring  men,  contention 
over  the  division  of  products  replaced  by  general  frater- 
nity,—  this  is  the  ideal  which  humanity  has  repeatedly 
approached,  abandoned,  and  approached  again. 

The  earlier  cycles  of  the  historic  movement  are  too 
remote  for  tracing;  the  records  of  the  last  one  are 
reasonably  distinct.  We  have  been  made  familiar,  of 
late,  with  the  village-community  of  mediaeval  times. 
Beginning  at  that  point,  we  may  trace  the  economic 
history  of  Europe  through  a  series  of  conditions  bearing 
less  and  less  resemblance  to  the  communal  ideal,  until 
we  reach  the  aphelion  of  the  system,  the  point  of  ex- 
treme individualism,  and  begin  slowly  to  tend  in  an 
opposite  direction.  This  turning-point  may  be  located 
at  a  period  about  a  hundred  years  ago.  While  Adam 
Smith  was  formulating  the  present  system  of  political 
economy,  the  world  was,  in  industrial  relations,  at  the 
extreme  limit  of  individualistic  development.  The 


176  THE   PRINCIPLE   OF   COOPERATION. 

manufacturers  of  the  period  were  a  myriad  of  capitalist- 
artisans,  each  working  in  his  little  shop.  The  common 
carriers  were  an  army  of  wagoners.  The  hired  workmen 
were  without  union  ;  and  every-man-for-himself  was  the 
rule  among  them,  as  among  their  employers. 

The  feature  of  the  next  period,  which  still  continues, 
is  a  practical  movement  tending,  not  to  abolish  or  to 
weaken  the  institution  of  private  property,  but  to  vest 
the  ownership  of  capital  in  organizations  rather  than  in 
individuals.  These  organizations  may  be  private  corpo- 
rations, village-communities,  cities,  or  even  states;  and 
if  laboring  men  are  represented  in  them,  there  is  seen, 
in  practical  working,  a  form  of  cooperation. 

The  word  thus  signifies  a  more  highly  developed 
social  organization..  Within  the  great  organism  which 
we  term  the  state  there  are  many  specific  organisms  of 
an  industrial  character.  Such  are  nearly  all  our  manu- 
factories. These  have  the  marks  of  high  development 
in  a  minute  differentiation  of  parts ;  labor  is  minutely 
subdivided  in  these  establishments.  One  man  grinds  in 
the  axe-factory,  and,  during  his  brief  lifetime,  is  not,  in 
economic  relations,  an  independent  being,  but  only  a 
part  of  the  grinding  organ  of  an  axe-making  creature 
whose  separate  atoms  are  men.  All  the  laborers  of  the 
factory,  taken  collectively,  compose  an  organism  which 
acts  as  a  unit  in  the  making  of  axes.  This  working 
body,  however,  with  its  human  molecules,  is  acting  in  a 
subordinate  capacity ;  —  it  is  hired.  As  a  whole  it  is 


THE   PRINCIPLE   OF   COOPERATION.  177 

serving  an  employer,  and  it  desires  to  become  indepen- 
dent. The  same  ambition  which  prompts  the  apprentice 
to  leave  his  master,  and  start  in  business  for  himself,  is 
now  prompting  these  organizations  of  employe's  to  desire 
a  similar  promotion.  Industrial  organisms  are  seeking 
what  individuals  have  long  been  encouraged  to  seek,  — 
emancipation.  It  is  the  old  struggle  for  personal  inde- 
pendence, translated  to  a  higher  plane  of  organic  life. 

The  modes  in  which  this  end  is  sought  are  various ; 
and,  in  so  far  as  the  object  is  realized  by  any  of  them, 
competition  is  held  in.  abeyance  within  the  organiza- 
tions, and  the  division  of  the  product  is  determined  by 
justice  rather  than  force. 

Justice  is  by  no  means  excluded  under  the  present 
system.  What  we  term  competition  is,  in  practice, 
subject  to  such  moral  limitations  that  it  can  be  so 
termed  only  in  a  qualified  sense.  Moral  force,  however, 
within  the  competitive  system,  acts  only  as  a  restrain- 
ing influence ;  it  fixes  certain  limits  within  which  the 
self-seeking  impulses  are  encouraged  to  operate,  and 
determine  by  a  struggle  the  division  of  the  fruits  of 
industry. 

The  adjustment  of  wages  by  arbitration  is  a  depart- 
ure from  this  principle,  and,  wherever  adopted,  remands 
competition  to  a  subordinate  place.  The  general  prev- 
alence of  it  would  mean  a  reign  of  law  rather  than  of 
force,  and  would  mark  an  era  in  the  moral  evolution  of 
society.  The  era  would,  however,  be  one  of  quasi- 


178  THE   PRINCIPLE   OF   COOPERATION. 

litigation.  To  be  successful,  the  plan  of  arbitration 
requires  many  tribunals  in  ceaseless  activity.  It  checks 
lockouts  and  strikes,  and  allays  the  antagonism  excited 
by  these  overt  conflicts.  The  speedy  establishment  of 
the  tribunals  is,  therefore,  the  present  desideratum. 
Yet  the  arbitrative  system  is  not  an  ideal  one.  Its 
fundamental  defect  lies  in  the  fact  that  it  concentrates 
the  attention  of  employers  and  of  workmen  on  the 
terms  of  the  division  of  their  joint  product.  An  issue 
of  this  kind,  even  though  amicably  adjusted,  tends,  in 
itself,  in  the  direction  of  antagonism.  It  fails,  more- 
over, to  secure  the  largest  product  for  division. 

Cooperation  works  in  an  opposite  way  in  both  re- 
spects. It  concentrates  the  thought  and  energy  of  all 
on  production,  the  process  in  which  the  interests  of 
different  classes  are  identical ;  and  it  develops  harmony 
of  feeling,  while  securing  a  large  product  for  distribu- 
tion. It  avoids  the  constant  readjustment  of  the  terms 
of  division,  which  is  the  characteristic  of  the  arbitra- 
tive system,  and  takes  the  workman  permanently  out 
of  the  position  in  which  his  gain  is  his  employer's  loss. 
It  makes  fraternity  possible  among  men. 

Wage  workers  are  now  striving,  by  the  crude  means 
at  present  available,  for  more  favorable  terms  of  distri- 
bution. The  amount  which  it  is  physically  possible  for 
them  to  gain  by  this  means  is  quite  limited.  How 
much  would  their  wages  be  increased  if  they  could  se- 
cure all  that  now  goes  to  employers?  Induce  capital- 


THE   PRINCIPLE    OF    COOPERATION.  179 

ists  to  loan  their  money  and  give  their  best  skill  and 
energy  in  management  for  nothing,  and  how  much 
would  thereby  be  added  to  the  general  sum  of  wages? 
The  data  are  not  at  hand  for  an  exact  answer ;  but  a 
calculation  lately  made  on  the  basis  of  the  figures  of 
the  last  census  would  seem  to  indicate  that  profits  and 
interest  amount  to  about  one  half  as  much  as  wages, 
and  that  a  distribution  that  should  leave  to  the  em- 
ployer nothing,  would,  at  the  most,  increase  wages  but 
fifty  per  cent. 

Now  it  is  obvious  that  no  class  of  men  will  or  can 
furnish  capital  and  expend  skill  and  energy  for  nothing. 
It  is  safe  to  assert  that  the  average  employer  would  close 
his  business  were  his  own  returns  reduced  to  one  half 
of  their  present  rate.  An  increase  of  one  quarter  in  total 
wages  would,  then,  seem  to  be  the  utmost  that  is  to  be 
hoped  for  under  present  conditions.  Now  if  the  strikes 
that  aim  to  bring  about  this  re-adjustment  lessen  produc- 
tion, they  farther  reduce  the  available  margin  on  which 
the  workmen  are  trying  to  draw.  If  an  increase  of 
twenty-five  cents  on  the  dollar  is  all  that  can  be  hoped 
for  while  the  productiveness  of  industry  is  unchanged, 
a  very  limited  increase  is  all  that  can  be  had  if  indus- 
tries are  deranged  and  their  productiveness  lessened. 
It  must  be  by  better  means  than  strikes  that  any  con- 
siderable gain  is  ever  to  be  realized  by  workmen. 

Cooperation  aims  to  increase  the  margin  from  which 
the  increment  of  gain  is  to  be  drawn.  It  makes  in- 


180  THE   PRINCIPLE   OF    COOPERATION. 

dustry  more  productive;  it  gives  to  the  employer  some- 
what more,  and  to  the  laborer  much  more  than  they 
now  receive.  Its  moral  advantage  over  the  present  sys- 
tem is  greater  than  its  material  one,  since  it  settles 
questions  of  division  in  a  manner  so  obviously  just  as 
to  hold  all  conflicting  claims  in  abeyance.  It  destroys 
the  material  out  of  which  contests  are  made. 

The  key  to  the  question  as  to  what  system  ought  to 
emerge  from  the  present  chaotic  condition  of  industry  is 
found  in  the  fact  that  employers  and  workmen  sustain  to 
each  other  two  distinct  relations,  of  which  one  is  antago- 
nistic and  the  other  harmonious.  In  merely  dividing  the 
product  of  industry  their  interests  conflict;  in  creating 
it  they  are  in  perfect  harmony.  Competition  and  even 
arbitration  bring  into  prominence  the  relation  which 
develops  conflict ;  cooperation  brings  into  sole  view  the 
relation  tending  to  unity. 

We  used  constantly  to  be  told,  and  still  frequently 
hear,  that  no  intelligent  conflict  between  capitalists  and 
laborers  is  possible ;  that  their  interests  are  completely 
identical,  and  that  their  normal  relation  is  one  of  para- 
disaical harmony.  Frequently  as  this  statement  was 
formerly  reiterated,  the  laborers  were  not  convinced ; 
and,  in  the  meanwhile,  the  practical  relation  between 
them  and  their  employers  grew  constantly  less  para- 
disaical. There  is,  in  prevalent  discussions,  a  confusion 
of  thought  which  an  analysis  of  actual  relations  ought 
easily  to  remove. 


THE    PRINCIPLE   OF   COOPERATION.  181 

We  have  said  that  there  is  harmony  of  interest  be- 
tween the  two  industrial  classes  in  the  operation  of 
production,  and  diversity  of  interest  in  the  operation 
of  distribution.  Under  a  wage  system  the  effect  of 
this  twofold  relation  is  to  create  a  conflict,  and  at  the 
same  time  to  set  limits  to  the  overt  acts  to  which  the 
conflict  might  lead.  So  long  as  this  system  continues, 
the  utmost  that  is  to  be  hoped  from  education  is  that 
the  limitations  may  be  applied  wisely.  Capitalists  and 
laborers  are  interested  that  as  much  wealth  as  possible 
shall  be  produced,  for  both  are  dependent  on  the  product. 
The  mill  must  be  run,  or  neither  owner  nor  employe* 
can  receive  anything.  When,  however,  the  product  is 
realized,  the  relation  changes ;  the  question  is  now  one 
of  mere  division.  The  more  there  is  for  the  owner,  the 
less  can  go  to  the  men ;  and  no  education  can  remove 
this  source  of  conflict. 

The  crew  of  a  whaling  ship  are  paid,  as  we  shall  later 
notice,  by  shares  of  the  cargo ;  and  if  the  proportion  to 
be  received  by  each  man  were  not  settled  in  advance 
by  contract,  they  would  naturally  work  with  good  will 
until  the  cargo  should  be  brought  into  port,  and  then 
develop  a  hopeless  wrangle  over  the  division  of  it. 
They  would  not,  however,  go  to  the  length  of  burning 
the  ship,  since  all  would  need  it  for  future  use;  but 
would  they  delay  the  refitting  of  it?  Would  they  at- 
tempt to  enlarge  their  returns,  at  the  cost  of  the  owner, 
to  an  extent  that  would  prevent  him  from  building 


182  THE    PRINCIPLE    OF    COOPERATION. 

more  ships?  Here  is  the  field  in  which  intelligence 
may  do  its  work.  Ignorance  and  passion  make  the 
limits  of  overt  action  broad,  and  tolerate  much  that 
discourages  production,  and  even  lessens  the  store  of 
wealth  accumulated.  Intelligence  narrows  the  field  of 
strife,  suppresses  all  violence,  and  confines  within  a 
minimum  range  all  measures  which  reduce  the  product 
of  industry ;  but  within  the  limits  as  ultimately  set,  it 
allows  the  conflict  to  continue. 

For  clearness  of  illustration  a  case  has  been  selected 
in  which  production  and  distribution  are  separated  in 
time ;  whalers  first  secure  the  oil,  and  then  divide  it. 
In  most  industries  the  two  processes  go  on  together ; 
wealth  is  divided  day  by  day,  and  week  by  week,  as  it 
is  produced,  and  the  relation  of  employers  and  employed 
is,  therefore,  not  an  alternation  in  time,  from  a  condi- 
tion in  which  their  relations  harmonize  to  one  in  which 
they  antagonize,  but  presents  a  permanent  harmony  in 
one  respect,  and  a  permanent  antagonism  in  another. 
Both  parties  are  interested  in  continued  and  successful 
production ;  but  in  the  mere  matter  of  distribution 
their  antagonism  is  as  permanent  as  their  connection. 
To  ignore  either  side  of  the  relation  is  unintelligent. 
If  it  be  incendiary  to  proclaim  an  irrepressible  conflict 
between  capital  and  labor,  it  is  imbecile  to  reiterate 
that  there  is  no  possible  ground  of  conflict  between 
them,  and  that  the  contests  which  actually  occur,  are 
the  fruit  of  ignorance. 


THE   PKINCIPLE   OF   COOPERATION.  183 

While  there  is  no  such  thing  as  changing  the  mode 
of  dividing  a  common  possession  in  such  a  manner  as  to 
give  one  partner  more  without  giving  the  other  less, 
there  is  such  a  thing  as  making  the  plan  of  division  so 
obviously  just,  as  to  settle  once  for  all  the  question  of 
proportionate  shares,  and  to  concentrate  the  energies  of 
all  on  the  securing  of  a  large  product.  Put  the  parties 
who  create  wealth  on  such  a  footing  that  neither  can 
claim  more  than  he  gets,  without  violating  an  obvious 
principle  of  equity,  and  they  will  make  the  division  un- 
thinkingly, and  plan  and  work  only  for  benefits  which 
accrue  alike  to  all. 

Such  is  the  aim  of  cooperation.  It  is  the  principle 
of  solidarity  in  a  new  field.  The  great  consolidations 
now  in  process  are  for  belligerent  ends ;  this  is  for  an 
amicable  end.  The  organization  of  capital,  on  the  one 
hand,  and  that  of  labor,  on  the  other,  enable  these 
agents  to  fight  a  good  battle  over  the  division  of  prod- 
ucts ;  cooperation  allays  strife,  and  enables  them  to 
expend  their  whole  energy  in  creating  products.  Re- 
curring again  to  the  diagram  which  illustrates  the  proc- 
ess of  distribution,  we  find  that  present  consolidations 
are  taking  place  between  the  horizontal  lines,  while 
cooperation  always  crosses  a  line,  and  merges  two 
classes  which  are  now  in  a  hostile  attitude. 

This  blending  of  classes  is  the  feature  even  of  that 
partial  cooperation,  known  as  profit-sharing.  The  work- 
man does  not,  by  this  plan,  own  capital  and  receive  in- 


184  Tin-:  PRINCIPLE  OF  COOPERATION. 

terest ;  but  he  uses  it,  and  receives  a  share  of  net  profits. 
lie  is  not  a  capitalist,  but  he  is  an  entrepreneur,  or  em- 
ployer; and  the  benefit  derived  from  the  system,  con- 
sists in  the  fact  that  he  performs  his  part  of  the  direc- 
tive function  exceeding!}'  well.  All  the  workmen  with 
their  employers  constitute,  collectively,  an  exceptionally 
good  entrepreneur. 

Mr.  Mill's  illustrations  of  this  system,  taken  from  the 
workshops  of  Paris,  are  familiar,  as  are  the  instances 
of  the  Paris  and  Orleans  railroad,  and  the  Whitwood 
collieries  described  by  Mr.  Sedley  Taylor.  The  Labor 
Report  of  Massachusetts  for  1886  shows  that  profit- 
sharing  has,  for  some  time,  had  a  foothold  in  this  State. 
The  introduction  of  the  system  into  new  fields  has,  of 
late,  been  of  almost  daily  occurrence.  The  success 
already  attained  places  this  mode  of  industry  beyond 
the  limit  of  schemes  which  can  claim  only  a  theoretical 
support.  It  is,  indeed,  essentially  right,  and  ought  to 
succeed ;  but  it  also  has  succeeded. 

An  illustration  of  profit-sharing  which  is  near  at 
hand  and  brilliantly  successful  is  afforded  by  the  whale 
fishery  of  New  England.  This  industry  places  in  a 
conspicuous  light  the  basis  of  the  success  of  the  system, 
namely,  the  increase  in  production  which  attends  it. 

The  difference  between  the  product  of  interested 
labor  and  that  of  labor  which  is  careless  and  lazy  is 
always  noticeable ;  but  in  the  whale  fishery  it  is  excep- 
tionally great.  An  eager  search,  a  zealous  pursuit  and 


THE    PRINCIPLE    OF    COOPERATION.  185 

a  resolute  attack  are  secured  only  by  the  stimulus  of  a 
personal  interest  in  the  result.  Superintendence  by 
owners  is  impossible,  unless  the  captain  be  a  proprie- 
tor ;  and  if  he  is  so,  the  plan  becomes,  to  that  extent, 
cooperative.  Even  though  the  captain  were  the  sole 
owner,  his  best  efforts  would  not  ensure  a  profitable 
voyage,  unless  a  heartier  obedience  could  be  secured 
than  is  usually  seen  on  ships.  Moreover  payment  by 
the  day  might  interest  the  crew  in  unduly  prolonging 
the  voyage.  Profit-sharing  has,  therefore,  driven  the 
wage  system  from  this  industry.  A  summary  of  results 
attained  by  this  method  in  other  fields  shows  that  the 
same  basis  of  success  exists  elsewhere,  though  not 
often  in  the  same  degree.  Profit-sharing,  as  a  rule, 
secures  interested  and  successful  efforts,  increases  the 
product  to  be  divided,  and  while  giving  to  the  capitalist 
somewhat  more,  gives  to  the  laborer  much  more  than 
can  be  had  under  the  present  plan  of  eternal  belliger- 
ency. 

It  is  an  advantage  of  the  system  of  profit-sharing  that 
it  may  be  gradually  developed.  It  may  differ  at  first 
from  the  wage  system  by  a  small  gradation,  which  may 
be  increased  by  successive  changes.  The  prevailing 
rate  of  wages  may  be  paid,  and  a  small  proportion  of 
the  net  profits  may  be  added,  as  a  bonus,  in  the  case  of 
a  few  workmen  in  responsible  positions.  The  amount 
distributed  and  the  number  of  the  recipients  may  be 
gradually  increased,  until  the  amount  received  from 


186  THE   PRINCIPLE   OF    COOPERATION. 

this  source  constitutes  a  main  dependence  of  every 
workman.  Then  only  is  the  laborer  so  far  merged  in 
the  employer  as  to  secure  the  maximum  benefit  from 
the  relation. 

Profit-sharing,  when  fully  developed,  requires  that  a 
provision  be  made  for  unprofitable  years  by  a  reserve 
fund,  from  which,  when  profits  for  the  time  disappear, 
the  stipend  necessary  for  the  laborer's  maintenance  may 
be  drawn. 

It  is  to  be  noted  as  theoretically  possible  that,  in 
industries  conducted  on  the  share  principle,  disputes 
may  arise  concerning  the  size  of  the  shares.  The  sea- 
men on  a  whaling-ship  who  receive  each  a  two-hundredth 
part  of  the  cargo  may  strike  for  the  one-hundred-and- 
fiftieth.  Strikes  of  this  kind  do  not,  in  fact,  occur, 
doubtless  because  the  workmen  realize  the  more  ade- 
quate justice  which  is  done  to  them  by  the  share  system, 
and  are  unwilling  to  disturb  its  successful  operation. 

The  increased  willingness  of  employers  to  adopt  this 
system,  in  some  of  its  gradations,  is  a  noteworthy  fact  of 
the  present  period.  Four  systems  of  industrial  organi- 
zation are  now  on  trial,  with  a  prospect  that  the  fittest 
will,  in  the  end,  survive.  If  the  competitive  system  in 
its  degenerate  state  leads  to  strikes  and  lockouts,  arbi- 
tration will  survive  as  between  these  two.  If  arbitration 
concentrates  the  attention  too  much  on  the  mere  divi- 
sion of  the  product,  profit-sharing  may  outlive  it.  If 
profit-sharing  still  leaves  as  subject  for  dispute  the  pro- 


THE    PRINCIPLE   OF    COOPERATION.  187 

portion  of  profits  to  be  given  to  labor,  full  cooperation 
may,  in  many  fields,  be  the  ultimate  survivor. 

A  better  mode  of  industrial  organization  replaces  a 
worse,  as  a  better  mechanical  process  replaces  an  infe- 
rior one,  by  enabling  those  who  use  it  to  undersell  their 
competitors.  The  immediate  effect  of  the  adoption  of 
profit-sharing  by  a  few  establishments  is  to  increase  the 
reward  of  the  laborers  employed  in  them.  This,  of 
itself,  is  a  powerful  incentive  to  other  workmen  in  the 
same  occupation  to  strive  to  secure  a  like  increase.  If 
this  leads  to  strikes,  it  gives  to  the  profit-sharing  estab- 
lishment a  relative  advantage,  in  addition  to  that  which 
is  inherent  in  the  plan  itself.  An  employer  whose 
working  force  may  always  be  depended  on  may  under- 
sell one  whose  men  are  watching  for  opportunities  to 
increase  their  wages  by  a  strike.  Under  present  condi- 
tions profit-sharing  must,  in  order  to  survive  in  the 
struggle  of  systems,  prove  superior,  not  to  competition 
working  smoothly  and  successfully,  but  to  competition 
essentially  vitiated  and  subject  to  incessant  friction.  It 
is  safe  to  assert  that  the  plan  of  profit-sharing  is  inher- 
ently capable  of  doing  this.  In  some  fields  it  has  proved 
superior  to  competition  at  its  best ;  it  will  easily  excel, 
in  many  more  fields,  the  wreck  of  the  old  system  with 
which  it  is  now  brought  into  comparison. 

If  a  corporation  were  to  adopt  the  share  system  in 
dealing  with  its  employe's,  and  were  to  pay  the  amount 
given  to  them,  in  excess  -of  daily  wages,  in  the  form  of 


188  THE    PRINCIPLE  OF   COOPERATION. 

stock,  the  effect  would  be  to  gradually  transmute  the 
partial  cooperation  into  the  complete  form.  New  estab- 
lishments started  on  this  plan  have,  as  a  rule,  perished 
in  their  infancy.  Experience  has  shown  that  the  mor- 
tality among  them  is  increased  by  loans  of  capital  made 
to  them  either  by  governments  or  by  philanthropic 
societies.  Such  loans  strain  the  enterprises  at  their 
weakest  point,  namely,  their  general  management. 
Profit-sharing  retains  the  experienced  employer  as  the 
general  director,  and  enlists  the  interest  of  every  work- 
man in  the  oversight  of  details  within  his  province. 
Full  cooperation,  unless  established  by  the  gradual 
method  above  spoken  of,  renders  a  managing  committee 
necessary,  and  the  inexperience  of  the  men  selected  for 
this  function  imperils  the  enterprise.  A  loan  increases 
tin's  danger,  by  increasing  the  scale  of  operations  under- 
taken, and  by  causing  the  enterprise  to  start  under  a 
burden  of  debt.  Great  as  are  the  disadvantages  of 
small  production,  a  cooperative  experiment  has  the  best 
chance  of  success  when  it  submits  to  them,  and  acquires 
the  needed  experience  as  it  enlarges  its  operations. 

The  survival  of  full  cooperation,  in  the  long  rivalry 
of  systems,,  depends  on  its  power  to  excel  other  systems 
in  the  results  which  it  ultimately  yields.  Failures  at 
the  outset  may  deter  experiments  in  this  direction,  and 
make  the  introduction  of  this  method  proceed  slowly ; 
but  they  do  not  change  the  law  of  survival.  That  is  a 
question,  not  of  initial  risks,  but  of  results  gained  by 


THE    PRINCIPLE   OP   COOPERATION.  189 

the  successful  experiment.  If  one  cotton  mill  run  on 
the  cooperative  plan  shall  ever  surpass  other  mills  in 
economy  of  production,  to  an  extent  that  will  enable  it 
to  undersell  their  product  in  the  market,  it  may  ulti- 
mately compel  them  to  adopt  this  method,  though  a 
score  of  earlier  experiments  have  failed. 

The  new  political  economy  must  recognize,  as  one  of 
its  principles,  this  special  and  higher  competition  by 
which  systems  are  tested.  Individual  competition,  the 
basis  of  the  traditional  science,  is,  in  extensive  fields,  a 
thing  of  the  past.  It  has  been  vitiated  by  combinations, 
leaving  society  without  its  former  regulative  principle. 
Yet  is  is  only  temporarily  that  wages  are  to  be  adjusted 
by  a  crude  struggle  of  labor  unions  with  employers' 
associations;  the  permanent  mode  of  adjustment  must 
be  by  some  application  of  moral  force.  Arbitration, 
profit-sharing  and  full  cooperation  depart  radically  from 
the  old  competitive  method,  and  appeal,  each  in  its 
own  way,  to  principles  of  equity,  in  dividing  the  pro- 
ceeds of  industry.  Yet  among  the  systems  as  such 
competition  should  rule,  in  determining  which  is  fittest 
for  ultimate  survival.  Cooperation  will,  by  this  process, 
have  a  fair  chance  in  the  industrial  world.  If,  in  the 
comparison  with  other  systems,  it  is  shown  that  it  ought 
to  survive,  it  will  do  so,  and  that  regardless  of  initial 
failures. 

The  chaotic  condition  of  industrial  society  opens 
wider  than  it  was  ever  opened  before  the  door  for  new 


190  THE    PRINCIPLE   OF   COOPERATION. 

forms  of  organization.  As  the  easiest  of  adoption,  the 
plan  of  adjusting  wages  by  arbitration  bids  fair  to  make 
the  most  rapid  headway.  When  thus  renovated,  the 
wage  system  will  bear  a  far  better  comparison  with  the 
two  cooperative  methods,  and  will  have,  by  so  much,  a 
better  chance  of  surviving.  In  some  large  fields  it  may 
continue  indefinitely.  The  comparison  between  it  and 
the  cooperative  systems  has  yet  to  be  made  by  the  tests 
of  the  market.  A  practical  comparison  of  the  relative 
merits  of  profit-sharing  and  full  cooperation,  is  still  far- 
ther in  the  future.  On  general  principles  that  system 
should  come  earliest  which  best  adapts  itself  to  an  im- 
perfect condition  of  society ;  and  those  forms  should 
come  later  which  are  the  expression  of  a  higher  develop- 
ment. On  these  grounds,  which  are  not  wholly  specu- 
lative, the  two  systems  which  are  based  on  the  fraternal 
principle  of  partnership,  may  be  expected  to  survive 
those  which  are  based  on  a  principle  of  strife. 

There  are  certain  establishments  nominally  coopera- 
tive which  have  little  significance,  as  bearing  on  the 
labor  question.  The  chief  of  these  is  the  Rochdale 
form  of  the  cooperative  store.  Workmen  variously 
employed  contribute  capital,  hire  men  of  their  own  class 
as  managers,  sell  goods  for  cash  at  market  prices,  pay  a 
fixed  percentage  per  annum  to  the  share-holders,  and 
divide  the  remaining  profits  among  the  customers,  on  a 
pro  rata  plan,  according  to  the  amount  of  their  pur- 
chases. The  essential  principle  of  true  cooperation  is 


THE    PRINCIPLE   OF   COOPERATION.  191 

its  obliteration  of  dividing  lines  in  industrial  society. 
Workmen  become,  by  means  of  it,  employers  of  their 
own  labor,  and  distribution,  the  cause  of  strife,  is  con- 
ducted on  a  new  plan.  To  this  result  the  Rochdale  en- 
terprise contributes  nothing.  The  men  who  own  the 
store  remain,  as  wage  workers,  in  the  mills;  and  the 
division  of  the  product  of  their  own  industry  proceeds 
according  to  the  old  plan,  and  with  the  same  liability 
to  conflict  as  if  the  store  had  never  existed.  Yet, 
by  a  strange  perversity  of  nomenclature,  this  process 
has  been  termed  "cooperative  distribution,"  apparently 
because  the  store  distributes  useful  articles  among  the 
members  of  the  community  who  patronize  it.  The  in- 
dustry conducted  in  it  is  the  ordinary  mercantile  one 
of  buying  in  bulk  and  selling  in  detail ;  and  it  creates 
the  various  utilities  which  we  have  analyzed  as  the  re- 
sult of  the  merchant's  function.  It  is  productive  in  as 
complete  a  sense  of  the  term  as  the  spinning  of  wool  or 
the  raising  of  sheep.  To  term  the  process  "distribu- 
tion "  is  to  increase  the  difficulty  which  besets  the  stu- 
dent of  grasping  the  essential  nature  of  the  distributive 
process.  This  is  a  division  of  the  abstract  value  created 
by  industry,  not  a  carrying  of  parcels  to  and  fro  in 
express  wagons. 

Whatever  the  Rochdale  process  is,  it  is  not  distribu- 
tive, since  it  leaves  the  men  who  own  it  still  working 
for  wages  under  their  old  employers.  In  the  case  even 
of  the  managers  and  clerks  in  the  store  itself  the  wage 


192  THE   PRINCIPLE    OF    COOPERATION. 

system  survives ;  these  men  are  paid  for  their  ser- 
vices like  the  clerks  of  any  merchant.  The  process 
is  complex,  and,  in  reality,  is  only  quasi-cooperative. 
It  may,  perhaps,  be  termed  mixed  cooperation,  since 
the  essential  peculiarity  of  it  is  that  men  who  are  em- 
ployes in  one  industry  become  proprietors  in  another. 
There  is  a  union  of  capital  and  labor  in  the  same  hands, 
but  not  in  the  same  industry.  The  store  is  of  value  to 
the  customers  which  it  serves,  since  it  offers  to  them  a 
virtual  reduction  of  prices,  and  at  the  same  time  pre- 
sents the  savings  thus  effected  in  periodical  dividends, 
which  the  receivers  are  encouraged  to  invest  as  capital 
in  the  enterprise.  It  has  an  invaluable  educating  effect 
upon  the  men  who  maintain  it.  It  also  reacts  favorably 
upon  the  character  of  the  mercantile  class,  since  it  im- 
pels all  who  would  hold  their  own  in  competition  with 
it  to  sell  honest  goods  at  fair  prices.  It  is  a  valuable 
social  institution  ;  but  it  leaves  the  labor  problem  where 
it  found  it. 

There  has  existed,  in  the  case  of  the  English  coopera- 
tive stores,  elements  of  success  which  are  not  to  be 
found  in  this  country.  There  was,  at  the  outset,  a  lack 
of  retail  shops  that  were  either  good  or  cheap.  There 
was  an  abnormal  extension  of  the  credit  system  among 
dealers;  and  there  was  an  absence  among  them  of  that 
sharply  competitive  spirit  which  leads  merchants  to 
strive  to  outdo  each  other  in  reducing  prices  to  a  mini- 
mum. There  was  a  large  homogeneous  population  of 


THE   PRINCIPLE   OF   COOPERATION.  193 

manufacturing  employes,  well  organized,  and  specially 
imbued  with  the  teachings  of  Robert  Owen.  The  asso- 
ciation, therefore,  had  exceptional  material  in  its  mem- 
bers, and  an  unusual  field  for  securing  custom  by  the 
virtual  reduction  of  prices  which  it  was  able  to  offer. 
That  similar  experiments  have  been  less  successful  in 
this  country  is,  in.  part,  due  to  the  fact  that  they  are 
less  needed.  The  absence  of  the  conditions  of  success 
signifies  the  presence  of  conditions  in  which  the  work 
of  the  store  may  be  done  by  other  agencies,  and  in 
which  more  important  fields  are  offering  for  coopera- 
tive enterprise. 

Competition  is  here  sharper,  and  retail  shops  are  bet- 
ter than  in  England ;  it  is,  therefore,  less  easy  for  a  store 
established  on  the  new  plan  to  attract  customers.  If, 
in  any  locality,  this  is  not  true,  it  is  an  evidence  that, 
in  this  one  respect,  the  local  conditions  make  a  coopera- 
tive store  both  desirable  and  practicable ;  and  if  the 
other  conditions  are  favorable,  such  an  enterprise  should 
be  started.  If  inertness  on  the  part  of  workmen  re- 
tards it,  there  is  a  field  for  moral  influence  to  do  its 
work. 

Complete  cooperation  has  succeeded  on  the  largest 
scale  in  agriculture.  The  economic  motive  for  this 
mode  of  living  is  less  urgent  in  this  department  of  in- 
dustry than  in  others.  Agriculture  is  not  yet  central- 
ized, as  are  manufactures,  and  the  relations  of  the 
classes  engaged  in  it  are  not  strained  to  a  dangerous 


194  THE    1'KINCIPLE   OF    COOPERATION. 

extent.  Yet  success  in  cooperative  farming  is  compara- 
tively easy ;  and  wherever  a  special  motive  impels  men 
to  this  mode  of  living,  a  community  may  be  founded 
and  made  to  thrive.  Such  an  extra-economic  motive 
may  be  afforded  by  religion.  The  Shakers,  the  Amana 
Communists,  the  Perfectionists  and  others  have  been 
united  by  bonds  other  than  those  of  pecuniary  interest. 
Such  communities  are  exceptional,  and,  like  the  co- 
operative stores,  contribute  little  toward  the  solution 
of  the  labor  question.  Their  success  is  valuable,  not 
mainly  as  a  proof  that  agricultural  communism  is,  in  a 
local  way,  possible,  but  as  an  evidence  that  this  mode 
of  living  is  favorable,  as  it  appears  to  have  been  at 
Jerusalem  of  old,  to  religious  brotherhood  among  men. 
The  early  Christian  commune  was  a  success  spiritually, 
if  not  otherwise ;  and  if  a  village  on  the  communal  plan 
can,  here  and  there,  be  made  to  thrive  economically  and 
religiously,  it  may  contribute  its  little  share  toward 
promoting  the  growth  of  fraternal  feeling  among  those 
who  look  upon  it  from  the  outer  world.  As  in  the  case 
of  the  Rochdale  enterprise,  its  chief  service  to  society  is 
educational. 

A  motive  of  a  directly  opposite  kind  may  induce  a 
large  city  to  adopt  measures  tending  in  a  communistic 
direction.  The  city  may  make  a  complete  surrender 
to  its  mercantile  environment.  It  may  conclude  that 
it  has  more  in  common  with  the  business  corporation 
than  with  the  state  as  a  political  entity,  and  that  it  can 


THE   PRINCIPLE   OF    COOPERATION.  195 

best  promote  the  comfort  of  its  inhabitants  by  owning 
gas  and  water  works  and  street  railways,  and  endeav- 
oring to  manage  them  in  the  interest  of  all.  If  it  suc- 
ceeds in  such  a  course  the  fact  is  due  to  the  strictly 
local  patronage  of  the  business  enterprises  undertaken. 
The  city  does  not,  thereby,  cater  to  the  general  outside 
public,  and  it  therefore  comes  into  no  competition 
with  private  producers,  whose  better  management  would 
bring  their  municipal  rival  to  failure.  Such  public 
enterprises  are,  in  a  sense,  cooperative,  since  all  who 
pay  taxes  are  share-holders  in  them ;  but  they  throw  no 
light  on  the  relations  of  capital  and  labor.  Their  work 
lies  in  the  department  of  municipal  finance. 

Prison  industry  conducted  on  "  public  account "  is  a 
useful  form  of  cooperation.  The  socialistic  ideal  is 
realized  in  a  great  reformatory  managed  on  this  plan ; 
there  is  "  labor  applied  to  public  resources,"  and  there 
is  strict  equity  in  the  division  of  the  proceeds.  In  such 
an  establishment  all  the  profits  and  more  go  to  the 
laborers.  Yet  motives  of  immediate  economy  favor 
the  letting  of  prison  labor  to  contractors ;  and  if  the 
plan  of  working  on  state  account  shall  ultimately  pre- 
vail, it  will  be  because  of  the  opportunity  which  it 
affords  of  effecting  the  moral  reformation  of  the  prison- 
ers. Against  such  a  gain  no  good  government  would 
weigh  for  a  moment  the  petty  economy  to  be  effected 
by  other  methods.  Good  government  is,  unhappily, 
not  among  the  data  of  our  own  present  calculations, 


196  THE   PRINCIPLE   OF   COOPERATION. 

and  the  contract  system  may  be  an  available  compro- 
mise of  interests  ;  yet  if  our  state  governments  improve, 
they  may  be  expected  to  favor  more  and  more  the  sys- 
tem which  gives  the  best  moral  results.  Since,  then, 
the  cooperative  form  of  prison  industry  has  other  than 
economic  ends  in  view,  it  sheds  no  light  on  the  labor 
problem. 

Public  work-houses  for  tramps  would  be  a  natural 
adjunct  of  a  reformatory  system,  and  would  help  to 
dissociate  the  tramp  question  from  the  general  labor 
problem.  It  would  intercept  anarchism  near  its  source, 
and  relieve  the  municipalities,  on  the  one  hand,  and  the 
labor  organizations  on  the  other.  In  so  far  as  this 
measure  would  clear  the  market  of  men  whose  presence 
depresses  wages,  it  would  contribute  indirectly  toward 
improving  the  workmen's  condition.  It  would  not 
otherwise  affect  the  mode  of  distributing  wealth.  If 
the  great  combinations  now  forming  shall  end  by  filling 
the  market  with  idle  men,  such  measures  as  this  will 
have  a  new  importance. 

Upon  arbitration,  profit-sharing,  and  full  cooperation 
must  be  our  dependence  for  the  solution  of  the  labor 
problem.  These  measures  are  named  in  the  direct  order 
of  their  availability,  and  in  the  reverse  order  of  their 
intrinsic  excellence.  Arbitration  is  the  easiest,  and 
will  doubtless  have,  in  the  decades  immediately  coming, 
the  greatest  extension.  It  is,  however,  only  the  more 
radical  measures,  those  which  merge  classes  now  hostile, 


THE   TRINCIPLE   OF   COOPERATION.  197 

that  can  insure  a  reign  of  permanent  peace  in  the 
industrial  world.  Profit-sharing  makes  the  workman, 
in  a  sense,  an  employer;  and  full  cooperation  makes 
him  both  an  employer  and  a  capitalist.  In  neither 
relation  is  he  a  disturbing  element,  for  in  neither  can 
he  well  fail  to  receive  obvious  justice. 

The  question  which  of  the  three  modes  of  adjusting 
the  rewards  of  labor  shall  ultimately  prevail  is  to  be 
determined,  not  by  the  comparative  difficulty  of  the 
methods,  but,  as  already  shown,  by  their  comparative 
excellence  when  they  prove  successful.  Original  fail- 
ures count  for  little,  and  the  result  of  one  successful 
experiment  counts  for  much,  in  deciding  the  question  of 
ultimate  survival.  That  system  will,  in  each  particular 
field,  survive  and  continue  which,  in  that  field,  is  per- 
manently the  best.  As  different  fields  offer  different 
conditions,  it  is  improbable  that  any  one  method  of 
industry  will  become  universal.  The  three  general 
systems  may  continue,  each  in  the  field  to  which  it  is 
specially  adapted. 

The  value  of  cooperation,  partial  or  complete,  is  not 
limited  to  its  effect  on  the  men  who  directly  par- 
ticipate in  its  benefits.  A  few  cooperative  establish- 
ments react  on  the  condition  of  men  who  still  work  for 
wages;  and  this  effect  must  become  more  marked  as 
the  system  of  arbitration  shall  obtain  a  foothold.  Tri- 
bunals for  adjusting  wages  will  need  a  standard  of 
justice,  in  making  their  awards.  At  first  they  may 


198  THE   PRINCIPLE   OF   COOPERATION. 

proceed  blindly,  striving  only  to  effect  a  rude  compro- 
mise of  opposing  claims.  They  may  "  split  differences," 
and  content  themselves  if  they  thereby  avert  strikes 
and  allow  business  to  continue.  Where  the  rate  is  a 
dollar,  and  the  workmen  claim  a  dollar  and  a  half,  they 
may  give  a  dollar  and  a  quarter.  This  would  be  a 
welcome  escape  from  the  present  chaos,  but  it  would 
not  be  arbitration  of  a  highly  developed  form. 

In  the  end  there  must  be  standards  of  equity  in  the 
division  of  the  products  of  industry.  Certain  propor- 
tions of  a  gross  return  will  come  to  be  recognized  as  a 
rightful  reward  of  employers  and  of  employed.  The 
proportions  will  vary  in  different  fields ;  but  if,  in  any 
field,  a  few  profit-sharing  establishments  exist  and  yield 
good  results,  they  will  assist  in  setting  the  standard  to 
which  arbitration  will  conform.  The  rewards  of  labor 
under  the  wage  system  may  thus  be,  in  a  measure, 
gauged  by  those  which  are  realized  under  the  system  of 
shares.  Profit-sharing,  even  011  a  limited  scale,  may 
diffuse  benefits  over  the  whole  industrial  field. 

The  cooperative  principle  in  its  different  forms  is  the 
Christian  socialism  of  Maurice,  Kingsley,  Hughes,  and 
their  worthy  co-laborers.  It  meets  an  imperative  hu- 
man need,  and  must  grow  surely,  though  not,  as  re- 
formers are  wont  to  estimate  progress,  rapidly.  Time 
is  requisite  for  the  development  of  its  completer  forms ; 
and  if  arbitration  can  tide  over  the  interval  of  transi- 
tion, and  secure  outward  peace  until  the  conditions  of 


THE   PRINCIPLE   OF   COOPERATION.  199 

true  fraternity  mature,  it  will  effect,  by  its  indirect  re- 
sults, tlie  redemption  of  society. 

The  condition  of  success  in  any  general  system  of 
cooperation  is  mental  and  moral  progress.  The  perma- 
nence of  republics  has  long  been  known  to  depend  on 
these  conditions ;  they  are  short  lived  when  the  people 
are  ignorant  or  bad.  Christian  socialism  is  economic 
republicanism ;  and  it  can  come  no  sooner,  stay  no 
longer,  and  rise,  in  quality,  no  higher  than  intelligence 
and  virtue  among  the  people. 

It  is  only  step  by  step  that  we  can  hope  to  approach 
the  social  ideal  that  is  beginning  to  reveal  itself.  Im- 
patience at  the  conditions  of  natural  progress  is  the 
root  of  political  socialism.  A  few  men  have  had  vis- 
ions of  an  ideal  state,  not  indeed  the  one  which  will 
exist  in  reality,  when  the  better  tendencies  now  at 
work  shall  be  consummated,  but  an  imaginary  condi- 
tion in  which  countries  shall  become  workshops  under 
political  control.  Men  are  to  be  found  possessing  the 
infinite  wisdom  and  virtue  necessary  for  directing  such 
operations  as  must  be  undertaken,  and,  by  a  greater 
miracle,  these  men,  when  found,  are  to  be  placed  in 
power  and  kept  there  by  popular  elections.  Human 
imperfections  are  a  forgotten  fact  in  the  situation. 

The  socialistic  state  would  destroy  personal  freedom. 
It  might  be  practicable,  if  men  were  morally  perfect ; 
but  it  would  be  intolerable.  Men  will  not  want  it  in 
the  millennium,  and  they  cannot  have  it  earlier.  The 


200  THE   PRINCIPLE    OF    COOPERATION. 

socialist  does  not  propose  to  wait  for  the  development 
of  a  perfect  moral  state  before  realizing  his  dream. 
Evolution  is  slow,  and  manufacture  rapid;  he  will, 
therefore,  make  the  ideal  state  with  his  own  hands.  He 
will  plan  it,  and  secure  the  popular  decree  that  shall  put 
it  into  operation.  "  Let  there  be  socialism ;  "  and  there 
will  be  socialism  —  over  night,  possibly:  anarchy  will 
put  an  end  to  the  experiment  in  the  morning. 

Viewed  on  but  one  side  the  socialistic  ideal  has  a 
beauty  that  captivates  the  intellect  which  fairly  grasps 
it.  It  bursts  on  the  view  like  an  Italian  landscape  from 
the  summit  of  an  Alpine  pass,  and  lures  men  over  the 
fatal  declivity.  Individualism  appears  to  say,  "  Here  is 
the  world;  take,  every  one,  what  you  can  get  of  it. 
Not  too  violently,  not  altogether  unjustly ;  but  with 
this  limitation,  selfishly,  let  every  man  make  his  pos- 
sessions as  large  as  he  may.  For  the  strong  there  is 
much,  and  for  his  children  more ;  for  the  weak  there  is 
little,  and  for  his  children  less." 

Socialism  appears  to  say,  "Here  is  the  world;  take 
it  as  a  family  domain.  Enjoy  it  as  children,  each  ac- 
cording to  his  needs ;  labor  as  brethren,  each  according 
to  his  strength.  Let  justice  supplant  might  in  the  dis- 
tribution, so  that,  when  there  is  abundance,  all  may 
participate,  and  when  there  is  scarcity,  all  may  share  in 
the  self-denial.  If  there  is  loss  of  independence,  there 
will  be  gain  of  interdependence ;  he  who  thinks  less  for 
himself,  will  be  forced  to  think  more  for  his  brother. 


THE   PRINCIPLE   OP  COOPERATION.  201 

If  there  is  loss  of  brute  force  gained  in  the  rude -struggle 
of  competition,  there  is  gain  of  moral  power  acquired 
by  the  interchange  of  kindly  offices.  The  beautiful 
bond  which  scientists  term  altruism  will  bind  the 
human  family  together  as  no  other  tie  can  bind  them." 

Sufferers  under  an  actual  system  naturally  look  for 
deliverance  and  for  a  deliverer.  The  impression  has 
prevailed  among  working  men,  that  a  new  device  of 
some  kind  might  free  them  from  their  difficulties. 
Ideal  socialism  seems  to  meet  this  expectation,  and 
those  who  preach  it  as  a  practical  aim,  naturally  receive 
a  hearing.  The  way  in  which  the  old  system  is  de- 
fended is  often  as  repulsive  as  the  new  system  is  at- 
tractive. When  one  teacher  bids  the  poor  submit,  and 
another  bids  them  hope,  they  will  not  be  long  in  choos- 
ing between  them.  Yet  there  is  no  royal  road  to  gen- 
eral comfort.  There  is  much  to  be  gained  by  studying 
the  changes  which  are  actually  in  progress,  but  nothing 
by  inventing  artificial  schemes  of  society.  The  new 
dispensation  is  coming,  but  not  with  observation  ;  and  it 
has  no  particular  apostles.  Very  substantial  have  been 
the  gains  of  recent  years;  and  in  the  promise  of  the 
future  there  may  already  be  discerned  an  ideal  sur- 
passing, in  its  attractiveness,  the  socialistic  dream.  It 
preserves,  what  socialism  from  the  outset  sacrifices, 
freedom.  By  steps  which  are  never  retraced  society  is 
drawing  nearer  to  it;  and  the  ideal  itself  is  valuable, 
not  indeed  as  something  to  be  grasped  by  a  frantic 


202  THE   PRINCIPLE   OF   COOPERATION. 

effort,  but  as  a  means  of  lightening,  by  intelligent  hope, 
the  steps  by  which  mankind  are  destined  to  approach 
it. 


CHAPTER  XI. 

NON-COMPETITIVE   ECONOMICS. 

COMPETITION  is  no  longer  adequate  to  account  for 
the  phenomena  of  social  industry.  What  was  once 
assumed  as  a  universal  law  is  now  but  partial  in  its 
operation.  Economic  science  needs  modernizing;  it 
was  a  half-century  after  the  publication  of  the  Wealth 
of  Nations  that  the  earlier  railroads  were  built,  and  it 
was  a  century  after  its  publication  that  the  great  rail- 
way and  telegraph  monopolies  were  effected.  During 
that  century  the  economic  activities  of  the  world  have 
gained,  in  intensity,  more  than  they  had  done  during 
the  entire  antecedent  period  of  recorded  history. 
Diversity  of  products,  rapidity  of  exchanges  and  indus- 
trial organization  are  the  criteria;  and  if  we  compare 
the  condition,  in  these  respects,  of  early  Oriental  mon- 
archies with  the  condition  of  the  world  in  1776,  and 
that,  again,  with  its  present  state,  we  shall  find  the 
second  difference  greater  than  the  first.  Steam  and 
electricity,  migrations  and  inventions,  have  brought 
this  about.  Economic  theories  adapted  to  a  civiliza- 
tion midway  in  its  development  cannot  apply  equally 
well  to  a  civilization  at  its  present  maximum.  We 
need  an  economic  science  adapted  to  steam,  or,  more 


204  SON-COMPETITIVE    ECONOMICS. 

accurately,  to  an  intensified  social  activity.  The  sys- 
tem of  Adam  Smith  has  advanced,  but  not  sufficiently ; 
and  what  is  lacking  is  more  than  the  trivial  adaptations 
sometimes  attempted ;  it  is  undetected  principles. 

There  is  something  deeper  than  competition  in  the 
economic  life  of  men ;  and  the  relation  of  competition 
to  the  underlying  law  has  not  been  analyzed.  The 
principle  whereby  the  struggle  of  many  men,  each  for 
himself,  to  secure  wealth  is  made  to  work  out  the  gen- 
eral good  of  all,  has  all  the  beauty  that  is  claimed  for 
it.  We  have  noticed,  however,  in  an  earlier  chapter, 
the  moral  limitations  that  hedge  about  this  struggle. 
The  contest  is  never  unrestricted.  A  Spirit  of  Justice 
is  ever  standing  over  the  contestants,  and  bidding  them 
compete  only  thus  and  thus.  This  they  may  do ;  that 
they  may  not  do ;  and  the  prohibitions  increase  with 
time.  Competition  at  best  exists  by  sufferance,  and 
the  power  that  tolerates  and  controls  it  is  moral. 

We  have  now  to  notice  a  still  more  decisive  manner 
in  which  the  moral  sovereignty  asserts  itself.  It  not 
only  regulates  competition  in  its  modes,  but,  at  will,  it 
thrusts  the  whole  process  aside.  It  is  because  there 
have  long  been  departments  of  practical  economy  not 
left  to  competition,  that  there  has  always  been,  in 
science,  some  need  of  a  province  of  non-competitive 
economics.  It  is  because  these  activities  are  increasing 
apace  with  the  rapid  developments  of  the  past  century, 
that  the  need  is  now  pressing. 


NON-COMPETITIVE   ECONOMICS.  205 

We  have  seen  that  the  ultimate  end  of  political 
economy  is  not,  as  is  generally  assumed,  the  mere  quan- 
titative increase  of  wealth.  Society,  as  an  organic  unit, 
has  a  higher  economic  end.  That  end  is  the  attain- 
ment of  the  greatest  quantity,  the  highest  quality,  and 
the  most  just  distribution  of  wealth.  It  is  the  true 
subjection  of  matter,  the  placing  of  it  in  the  most 
rational  condition,  absolute  and  relative.  The  matter 
and  force  of  external  nature  are  to  be  brought  into 

O 

that  state  which,  in  itself,  is  best,  and  they  are  to  be 
brought  into  that  relation  of  ownership  which  best 
promotes  the  general  happiness.  Matter  modified  by 
labor  in  accordance  with  enlightened  reason  may  be 
termed  rational  wealth ;  it  is  this  that  society  is  pur- 
suing, and  partially  realizing. 

The  actual  wealth  of  society  varies  more  or  less  from 
the  ideal  standard,  arid  is  but  partly  rational.  Much 
of  it  is  not  of  high  quality,  and  much  that  is  so  is  not 
well  distributed;  it  is  but  partly  beneficent,  in  itself, 
and  in  its  relation  to  owners.  Immoral  books,  poison- 
ous beverages,  and  adulterated  articles  of  food  are 
wealth  of  an  actual  but  irrational  sort ;  so  also  are  all 
things  that  minister  to  vice.  These  are  real  commodi- 
ties, because,  somewhere  in  society,  are  men  whose 
impulses  crave  them ;  they  are  irrational,  because  the 
reason  that  is  inherent  in  society  as  a  whole  does  not 
want  them,  and  would  cast  them  out  if  it  could. 

The  want  of  a  true  teleology,  the  failure  to  discover 


206  NON-COMPETITIVE    ECONOMICS. 

the  TeA,o<r,  or  ultimate  goal  of  social  tendencies,  and  the 
consequent  failure  to  discriminate  between  actual  and 
rational  wealth,  does  not,  indeed,  deprive  current  polit- 
ical economy  of  its  practical  value ;  but  it  lessens  that 
value,  and  throws  the  system  more  and  more  out  of 
harmony  with  the  modern  spirit.  A  little  while  hence, 
and  the  omission  will  be  disastrous. 

The  competitive  mode  of  production  and  distribution 
has  been  adopted  by  society  because,  in  its  day,  it  has 
given  the  nearest  practical  approximation  to  the  stand- 
ard of  rational  wealth.  Imperfect  as  are  its  results, 
those  of  any  other  system  would  have  been  more  im- 
perfect; they  would  have  rendered  the  wealth  of  so- 
ciety less,  worse,  or  worse  distributed.  As  compared 
with  them,  the  principle  of  competition  has  increased, 
improved,  and  with  rude  equity  divided  the  products  of 
industry ;  and  for  this  reason  only  lias  it  been  tolerated. 

The  vast  residuum  of  competition  which  still  exists 
continues  to  do  a  similar  work,  and  owes  to  this  fact  its 
prospect  of  survival.  Inherently  it  has  no  vitality  ;  it 
needs  and  possesses  a  raison  d'etre,  and,  in  the  absence 
of  it,  would  cease  to  exist.  It  rests  on  moral  law.  In 
the  department  of  distribution  its  working  may  be  less 
perfect  than  in  that  of  production.  It  may  be  but  a 
spontaneous  and  imperfect  agent  for  dividing  wealth, 
with  approximate  justice,  among  the  members  of  soci- 
ety ;  yet  it  is  only  because  it  serves  this  purpose,  and 
so  long  as  it  does  so,  that  it  is  tolerated ;  and  there 


NON-COMPETITIVE   ECONOMICS.  207 

never  was  a  time  when  it  would  not  have  been  thrust 
aside,  could  society  have  seen  its  way  to  the  adoption 
of  another  method  which  would  more  nearly  have  real- 
ized the  rational  end  in  view.  Powerful  as  the  com- 
petitive principle  appears  in  practice,  it  is  not  supreme, 
still  less,  self-existent ;  it  is  the  creature  of  an  exigency, 
created  as  the  rude  servant  of  a  higher  power,  and  con- 
tinuing by  sufferance.  It  is  perpetually  on  trial,  and 
its  minutest  acts  are  subject  to  the  scrutiny  of  that 
supreme  moral  court  to  whose  verdict  all  systems,  eco- 
nomic as  well  as  civil  and  legal,  must  submit. 

Society  does  not  and  will  not  completely  abandon  the 
competitive  principle  ;  it  is  still  needed  as  an  agent  of 
distribution,  and  it  is  the  sole  means  on  which  we  can 
rely  for  the  securing  of  a  large  product  to  distribute. 
Yet,  if  what  we  have  claimed  be  true,  society  should 
hold  this  agent  in  abeyance  within  limited  fields  of  in- 
dustry, whenever,  within  those  limits,  a  better  system 
is  available.  This  it  actually  does.  Sometimes,  as 
in  railroad  operations,  competition  works  sluggishly, 
interruptedly,  or  not  at  all;  sometimes,  as  in  the 
transactions  of  labor  and  capital,  it  works,  for  a  time, 
one-sidedly  and  cruelly,  and  then  almost  ceases  to  do 
its  work.  It  may  happen  that,  in  exactly  that  field 
in  which  competition  operates  unusually  ill,  another 
method  may  operate  especially  well,  and  the  compar- 
ison of  results  may  be  in  favor  of  the  latter.  If  once 


208  NON-COMPETITIVE   ECONOMICS. 

society  becomes  conscious  that  this  is  the  fact,  farewell 
to  one  particular  form  of  competition. 

That  the  future  field  of  non-competitive  economics 
will  be  vast  is  less  surprising  than  that  its  present  field 
is  considerable.  Arbitration  promises  to  replace  the 
former  agent  of  distribution  in  a  comprehensive  way. 
Cooperation  is  the  antithesis  of  competition ;  wherever 
it  exists  the  competitive  struggle  is  held,  to  some  ex- 
tent, in  abeyance.  In  practice  cooperation  is  most 
frequently  of  an  incomplete  kind,  and  a  greater  or 
less  residuum  of  competition  remains;  but  any  real- 
ization of  the  one  principle  means  the  elimination  of 
somewhat  of  the  other ;  and,  moreover,  whatever  is 
done  by  a  public  or  governmental  agency  is  done,  in  a 
sense,  cooperatively.  What  we  have  now  to  consider  is 
a  certain  displacement  of  competition  which  is  of  long 
standing,  and  which,  therefore,  serves  to  show  that 
society  has  always  been  ready  to  set  the  process  aside, 
whenever  it  has  been  able,  by  other  means,  to  better 
attain  the  rational  end  which  it  has  had  in  view. 

It  is  the  misfortune  of  the  narrow  and  illogical  defi- 
nitions of  wealth  formerly  current,  and  not  yet  en- 
tirely abandoned,  to  exclude  from  their  classification 
much  that  is  really  wealth ;  and  the  excluded  portion 
is,  to  a  great  extent,  of  the  highest  and  most  rational 
quality.  It  embodies  itself  often  in  tenuous  and  un- 
substantial matter,  as  in  the  vibrating  particles  that 
constitute  light  and  sound;  but  it  ministers  to  the 


NON-COMPETITIVE    ECONOMICS.  209 

highest  wants  of  human  nature,  and  is  tributary  to  true 
and  permanent  happiness.  As  we  formerly  endeav- 
ored to  show,  these  finer  commodities  are  to  the  soul 
what  those  of  the  grosser  sort  are  to  the  body ;  and  if 
man  is  dependent  on  literal  bread  for  life,  he  is  depend- 
ent on  loaves  of  a  more  spiritual  sort  for  a  life  that  is 
worth  the  living. 

Now  these  most  rational  forms  of  wealth  have  regu- 
larly been  distributed  on  more  or  less  communistic  prin- 
ciples. Beauty  and  truth  have  never  been  monopolized 
and  sold  to  the  highest  bidder.  Public  agencies  have 
embodied  them  in  the  delicate  material  forms  that  come 
within  our  definition  of  wealth,  and  have  distributed 
them  freely  to  all,  as  the  Roman  emperors  distributed 
the  corn  of  Egypt.  Not  that  all  such  commodities  have 
been  so  distributed ;  the  competitions  of  the  market 
have  determined  the  ownership  of  some  of  the  costliest 
of  them.  There  has  been  an  interesting  intermingling 
of  cooperative  and  competitive  action  in  this  depart- 
ment, and  it  will  be  instructive  to  ascertain  the  limits 
where  the  one  process  ceases  and  the  other  begins. 

From  the  days  of  Athens  until  now  the  best  products 
of  art  have  been,  under  one  or  another  form  of  pro- 
cedure, purchased  by  the  public  and  assigned  to  the 
general  use.  Statues  by  the  Greek  masters  were  in 
temples  or  on  the  street.  The  greatest  architectural 
works  of  the  Romans  were  public  theatres,  baths, 
basilicas,  fora,  and  temples.  The  early  Christian  com- 


210  NON-COMPETITIVE   ECONOMICS. 

munity,  a  state  within  a  state,  expended  its  best  efforts 
in  the  adornment  of  churches ;  and  the  triumphs  of  the 
Renaissance  were  in  works  of  this  kind.  Most  of  the 
works  of  the  great  masters  are  now  free  for  the  enjoy- 
ment of  all. 

Yet,  from  the  first,  also,  many  products  of  art  have 
been  sold  in  the  open  market  and  purchased  for  private 
use.  Wealthy  men  have  always,  whether  from  taste, 
vanity  or  both,  been  consumers  of  artistic  products. 
The  amount  of  this  consumption  was  small  in  Greece, 
larger  in  Rome,  small  again  in  the  early  Christian  state, 
and  even  at  the  period  of  the  Renaissance,  but  is 
increasingly  large  in  recent  times.  The  accumulation 
of  vast  fortunes  in  our  own  country  may  be  expected 
to  increase  this  tendency ;  while  the  frequent  gift  or 
bequest  of  private  fortunes  for  purposes  of  public 
benefit  may  be  expected  to  proportionately  increase  the 
amount  of  such  products  placed  at  the  free  disposal  of 
the  people.  This  is  one  regal  function  of  the  money 
king.  Rational  wealth  in  aesthetic  form  is,  in  great 
part,  owned  and  enjoyed  non-competitively. 

This  free  disbursal  of  valuable  products  is  distribu- 
tion of  an  extraordinary  kind;  and,  singularly  enough, 
it  in  no  way  changes  the  relation  of  employers  to  the 
employed.  Competition  is,  by  this  means,  suppressed 
only  among  the  consumers  of  particular  articles ;  the 
industrial  groups  which  produce  them  are  not  affected. 
Artists  strive  to  excel  each  other  in  the  quality  of  their 


NON-COMPETITIVE    ECONOMICS.  211 

work,  and  receive  for  it  the  price  determined  in  the 
open  market  by  ordinary  laws.  This  producing  group 
receives  its  share  of  the  general  wealth  of  society  in  the 
same  manner  as  others,  and  subdivides  it  among  its 
individual  members  in  the  same  way.  The  artist  must 
pay  his  assistants  the  market  price  for  their  labor.  The 
supplanting  of  competition  consists  in  the  fact  that 
other  groups  get  works  of  art  without  being  obliged 
to  buy  them,  and  to  bid  against  each  other  in  securing 
them.  Society  pays  for  the  products  which  it  thus 
disburses  from  the  proceeds  of  taxes ;  and,  as  these  are 
gauged  more  or  less  according  to  the  property  of  the 
persons  who  pay  them,  while  the  products  purchased 
by  the  means  are  placed  at  the  free  disposal  of  all,  it 
would  seem  that,  here  at  least,  men  realized  the  social- 
istic ideal,  producing  according  to  their  ability,  and 
consuming  according  to  their  need. 

Yet  the  consumption  of  such  products  is  gauged,  not 
by  general  need,  but  by  inclination  and  opportunity; 
and  in  this  difference  lies  the  basis  of  the  system  of 
disbursing  rational  wealth.  Were  competition  to  deter- 
mine the  amount  which  each  person  might  enjoy  of 
these  fine  and  costly  products,  the  poor  would  get  none 
of  them ;  and,  in  accordance  with  the  law  cited  in  an 
earlier  chapter,  they  would  lose  their  desire  for  them. 
This  would  involve  a  personal  deterioration  ;  and  it  is 
this  which  the  state  interposes  to  prevent.  For  its  own 
reasons  it  determines  that  men  shall  not  thus  degener- 


212  NON-COMPETITIVE  ECONOMICS. 

ate ;  that  they  shall  be  educated  to  desire  and  to  use 
the  refining  products  of  the  artist's  labor.  The  ulti- 
mate purpose  is  non-economic ;  it  is  to  elevate  the 
nature  of  individual  men,  and  to  make  the  state  sounder 
and  safer.  Yet  the  process  contributes  to  the  eco- 
nomic end  of  society  ;  it  enables  men  to  advance  directly 
toward  the  summum  bonum  of  industrial  action.  It 
keeps  alive  the  popular  demand  for  works  of  art,  and 
insures  the  continued  production  and  consumption  of 
many  of  the  better  forms  of  wealth. 

Commodities  which  minister  to  the  desire  for  knowl- 
edge come  next  in  order,  in  the  extent  to  which  they 
have  been  disbursed  at  public  expense.  Oral  instruction 
has  not  always  been  free,  and  books  have  been  so  still 
less  frequently.  In  the  later  ages  of  the  world,  how- 
ever, schools  of  some  sort  have  been  cheap  enough  for 
all  but  the  very  destitute,  and  this  cheapness  has  been 
the  result  of  some  form  of  public  action.  Commodities 
embodying  knowledge  have  been  either  given  to  con- 
sumers or  sold  to  them  for  less  than  their  cost.  The 
mediaeval  church  assumed  this  governmental  func- 
tion among  others.  The  modern  public  school  is  either 
entirely  free  or  so  nearly  so  as  to  throw  its  chief  cost 
upon  the  State,  and  open  it  to  universal  use. 

Endowments  may  be  regarded  as  being,  originally, 
gifts  to  the  public,  though  administered  without  official 
intervention ;  and  schools  established  on  this  basis  are 
not,  as  far  as  the  enjoyment  of  their  products  is  con- 


NON-COMPETITIVE    ECONOMICS.  213 

cerned,  to  be  separated,  in  principle,  from  other  public 
agencies  for  producing  and  disbursing  those  commodi- 
ties which  are  food  for  the  intellect.  The  endowed 
colleges  of  England  and  America  are,  in  their  effect  on 
students,  public  institutions.  While  these  agencies  are 
distributing  oral  instruction  in  a  manner  more  or  less 
independent  of  competition,  free  libraries,  endowed  or 
otherwise,  are  doing  the  same  for  the  more  substantial 
instruments  of  education.  Here  again  there  is  an  ulte- 
rior end  in  view ;  the  welfare  of  citizens  and  the  safety 
of  the  State  demand  the  free  disbursal  of  these  products. 
Yet  the  economic  effect  of  the  process  is  real  and  im- 
portant, and  public  instruction  demands  consideration 
from  the  economist,  as  well  as  from  the  educator  and 
the  statesman.  Rational  wealth  in  the  forms  that 
nourish  the  intellect  is,  to  a  great  extent,  distributed 
non-competitively. 

There  are  times  when  the  Church  is  to  be  regarded  as 
one  of  the  departments  of  the  State ;  the  material  appli- 
ances of  religion  then  fall  in  the  same  category  as  those 
of  education  and  artistic  culture.  The  State  for  ages 
nourished  the  heart  as  well  as  the  taste  and  the  intellect. 
The  peculiarity  of  modern  times  and  of  our  own  country 
is  the  discontinuance  of  this  process.  In  America, 
State  and  Church  have  separated ;  and,  while  the  State 
retains  the  instruments  of  instruction,  and,  to  a  great 
extent,  those  of  aesthetic  culture,  it  has  thrown  the 
distribution  of  religious  nutriment  back  into  the  market 


214  NON-COMPETITIVE    ECONOMICS. 

It  feeds  the  intellect  and  the  taste,  but  leaves  the  heart, 
like  the  body,  to  be  nourished  by  each  man  for  himself. 
Yet  the  necessities  of  the  case  have  not  admitted  of  free 
individual  action  in  this  department.  Men  cannot  ob- 
tain the  needed  sustenance  separately,  and  voluntary 
cooperation  has  at  once  assumed  the  function  abandoned 
by  the  State.  Churches  are  the  best  established  of 
cooperative  societies,  and  their  economic  functions  are  a 
fascinating  subject  of  the  non-competitive  division  of 
political  economy. 

In  a  few  countries  governmental  cooperation  is  ex- 
tended over  the  field  of  railway  transportation ;  and 
that  the  same  will,  ultimately,  be  the  case  in  America 
is  the  belief  of  some  persons  who  realize  the  evils  of 
railroad  combinations,  but  fail  to  see  the  good  which 
comes  from  such  competition  as  still  exists  in  this  de- 
partment. Pools  do  not  prevent  companies  from  striv- 
ing to  surpass  each  other  in  perfecting  their  methods, 
and  in  securing,  by  efficient  management,  a  large  pro- 
duction of  wealth.  Here,  under  a  regime  of  fixed  rates 
for  transportation,  lies  their  sole  chance  of  increasing 
their  profits. 

The  incentive  to  a  state  management  of  railroads  is, 
in  principle,  identical  with  that  which  prompts  to  the 
forms  of  non-competitive  action  already  noticed.  The 
object  is  to  insure  the  production  and  disbursement  of 
forms  of  wealth  which  are  essential  to  the  public  wel- 
fare. It  is  not,  however,  the  regular  products  of  rail- 


NON-COMPETITIVE    ECONOMICS.  215 

way  operations  that  are  concerned,  but  certain  special 
products,  the  study  of  which  will  reveal  an  important 
and,  as  yet,  unanalyzed  economic  principle,  which  we 
may  term  that  of  inappropriable  utilities. 

Labor  imparts  utilities  to  matter,  and  the  impulse  to 
it  is  that  these  may  be  enjoyed  by  the  laborer.  To  be 
enjoyed  they  must  be  owned;  the  fruits  that  the  la- 
borer raises  or  the  implements  that  he  fashions  must 
belong  to  him,  and  to  no  other  person.  It  is  the  nature 
of  some  utilities  to  be  taken  completely  into  the  posses- 
sion of  him  who  produces  them.  Others,  however, 
elude  him.  It  is  the  nature  of  certain  utilities  to  flee 
from  him  who  creates  them,  and  diffuse  themselves 
among  the  members  of  the  community.  The  builder 
of  a  house  is  able  to  appropriate  the  greater  portion  of 
the  utility  created.  The  roof  shelters  and  the  walls 
enclose  that  which  makes  his  life  enjoyable.  If  the 
house  be  comely  in  form,  and  attractive  in  surround- 
ings, he  has  the  most  constant  enjoyment  of  its  beauty. 
Yet  this  enjoyment  cannot  be  monopolized ;  the  taste- 
ful exterior  of  the  dwelling,  with  the  beauty  of  its 
shade-trees  and  lawn,  create  an  inappropriable  utility 
which  distributes  itself  among  neighboring  proprietors. 
Its  presence  is  indicated,  and  its  measure  expressed,  by 
the  increased  price  of  adjoining  property. 

In  the  case  of  railroads  the  inappropriable  utilities 
are  so  great  as  almost  to  overbalance  those  which  can 
be  retained  by  the  owners.  The  railroad  creates  a 


216  NON -COMPETITIVE    ECONOMICS. 

value  far  in  excess  of  that  which  its  projectors  can 
realize ;  and  this  distributes  itself  among  the  adjacent 
population,  and  appears  in  the  enhanced  value  of  lands 
and  the  increased  rewards  of  general  industry.  It  has 
often  happened  that  a  railroad  which  enriched  the  popu- 
lation of  the  section  which  it  traversed,  rendered  its 
projectors  bankrupt. 

The  granting  of  public  aid  to  railroad  companies  is  a 
recognition  of  the  principle  of  inappropriable  utilities; 
it  is  a  payment,  by  the  public,  for  a  value  which  the 
company  is  compelled  to  transfer  to  it  from  sheer  in- 
ability to  retain  it  for  itself.  The  land  grant  is  a  crude 
mode  of  effecting  this  payment,  which  has  very  properly 
been  discontinued  because  of  the  abuses  which  it  has 
entailed.  The  values  created  attach  in  part  to  the 
lands  granted  to  the  company,  and  in  part  to  the  alter- 
nate sections  which,  by  the  practice  of  our  government, 
have  been  reserved  for  itself.  The  public  and  the  com- 
pany thus  share  equally  in  this  particular  benefit. 

Much  of  the  utility  created  by  the  building  and 
operation  of  the  railroad  remains  inappropriable.  The 
important  fact  is,  that  this  portion  becomes  a  matter  of 
indifference  to  the  corporation.  Benefits  which  the  rail- 
road company  confers,  but  for  which  it  can  secure  no 
reward,  are  of  no  consequence  to  it ;  they  may,  there- 
fore, be  sacrificed  with  impunity.  Through  the  work- 
ing of  this  principle  of  inappropriable  utilities,  much  of 
the  welfare  of  large  populations  is  intrusted  to  corpo- 


NON-COMPETITIVE   ECONOMICS.  217 

rations  having  no  interest  in  maintaining  it.  It  will  be 
subserved  as  long  as  the  company  has  nothing  to  gain 
by  sacrificing  it,  not  longer. 

Recently,  in  our  country,  the  company  or  its  man- 
agers have  often  had  something  to  gain  by  sacrificing 
the  welfare  of  the  inhabitants  of  the  districts  through 
which  they  pass.  Discriminating  rates  for  transporta- 
tion, as  well  as  other  abuses,  have  recklessly  made  or 
marred  the  welfare  of  sections  of  the  country.  The 
State  is  involved  in  this ;  it  has  an  interest  in  the  elu- 
sive but  real  utilities  which  a  railroad,  properly  man- 
aged, scatters  throughout  a  land.  Can  it  best  secure 
them  by  supervising  the  railways  or  by  owning  them  ? 
Experience  thus  far  strongly  favors  the  former  alterna- 
tive, as  both  more  profitable  and  more  safe.  That 
which  places  the  regulating  and  the  owning  of  railroads 
by  the  state  in  the  same  category  with  public  education 
is  the  fact  that  in  both  cases  does  a  public  agency 
intervene  in  order  to  secure  the  general  diffusion  of  im- 
portant utilities. 

It  is  evident  that  the  principle  of  inappropriable  util- 
ities is  applicable  to  every  form  of  industry  in  which 
the  community  has  an  independent  interest,  and  in 
especial  to  those  of  an  educational  and  religious  charac- 
ter. The  exemption  of  institutions  of  this  kind  from 
taxation  is  a  partial  refunding  of  the  value  diffused  by 
them  through  the  community. 

There  is,  then,  a  province  of  economics  not  ordinarily 


218  NON-COMPETITIVE   ECONOMICS. 

recognized,  because  wholly  or  partially  outside  of  the 
range  of  competition.  The  province  has  long  been  a 
considerable  one,  and  the  changes  now  in  progress,  the 
development  of  the  system  of  arbitration  and  of  that  of 
cooperation,  will  ultimately  give  to  it  a  vastly  greater 
extension.  A  portion  of  it  has  failed  to  receive  atten- 
tion from  economists  in  consequence  of  illogical  concep- 
tions of  wealth,  which  excluded  its  highest  forms,  and 
thus  restricted  the  scope  of  economic  science  by  ruling 
out  entire  provinces  of  industry.  Reinstate  these  de- 
partments of  economic  life,  recognize  the  true  wealth- 
producing  function  of  such  agents  as  the  church  and 
the  school,  and  the  extent  and  importance  of  the  non- 
competitive  division  of  political  economy  becomes  ap- 
parent. We  have  hastily  traced  the  boundaries  of  this 
division,  with  especial  reference  to  the  older  portion  of 
it.  The  free  disbursal  of  products  essential  to  the  pub- 
lic welfare,  has  been  secured  by  a  departure  from  ordi- 
nary distributive  methods.  The  ground  of  the  radical 
difference  between  the  two  economic  methods  is  a 
matter  of  both  scientific  and  general  interest,  and  we 
have  found  it  in  a  teleologic  principle  in  society,  a  quest 
for  a  wealth  that,  in  quantity,  quality,  and  distribution, 
shall  conform  to  the  requirements  of  enlightened  reason. 
Within  the  limits  which  we  have  indicated,  society  has 
better  attained  its  end  by  abandoning  its  usual  competi- 
tive mode  of  action. 

We  have  aimed,  incidentally,  to  bring  into  view  the 


NON-COMPETITIVE   ECONOMICS.  219 

sovereignty  of  moral  law  in  the  economic  practice  of 
the  world.  If  competition  were  supreme,  it  would  be 
supremely  immoral;  if  it  existed  otherwise  than  by 
sufferance,  it  would  be  a  demon.  Nothing  could  be 
wilder  or  fiercer  than  an  unrestricted  struggle  of  mil- 
lions of  men  for  gain,  and  nothing  more  irrational  than 
to  present  such  a  struggle  as  a  scientific  ideal.  If  it  be 
pruned  of  its  greater  enormities,  as  in  actual  life  is 
done,  if  combinations  restrict  its  field,  and  if  arbitration 
and  cooperation  assume  some  of  its  functions,  it  still 
requires  discernment  to  see  the  agency  of  moral  law 
amid  the  abuses  that  remain.  If,  however,  the  sole  end 
for  which  the  process  is  tolerated  is  the  suppression  of 
greater  and  more  general  injustice,  and  if  a  superior 
power  is  ready  to  abolish  it  wherever  it  fails  to  fulfil 
this  end,  it  may  be  classed,  not  as  an  ideal,  but  as  an 
available  means  of  approaching  an  ideal.  In  this  view 
only  are  we  secure  from  the  blank  confusion  of  suppos- 
ing that  the  comprehensive  field  of  economic  life  is 
alone  outside  of  the  controlling  influence  of  morality. 
The  insight  that  can  detect  providential  design  in  the 
uglier  forms  of  external  nature,  should  detect  it,  also, 
in  the  repulsive  phenomena  of  organized  industry,  in 
the  "higgling  of  the  market,"  the  altercations  of  the 
civil  law,  and  the  ignoble  scramble  for  personal  profit. 

As  thus  apprehended,  there  is  no  apotheosis  of  selfish- 
ness in  the  theory  of  political  economy,  and  there  is  no 
necessarily  corrupting  effect  from  the  practical  out- 


220  NON-COMPETITIVE   ECONOMICS. 

working  of  its  principles.  Recognizing  the  competitive 
struggle,  wherever  it  survives,  as  the  imperfect  agent 
of  moral  law,  a  man  may  participate  in  it  without  taint. 
The  bad  effects  of  the  contest  he  does  not  need  to 
suffer ;  and  to  the  lower  levels,  where  the  golden  calf- 
worship  is  unhindered  and  blighting,  he  does  not  need 
to  descend.  It  is  his  privilege  to  live  on  the  moun- 
tainous slope  at  the  summit  of  which  moral  law  reigns. 
He  may  buy,  sell,  and  get  gain,  as  well  as  give  thanks 
and  worship,  with  his  eyes  uplifted  to  the  hills  whence 
cometh  his  help. 


CHAPTER   XII. 

THE  ECONOMIC   FUNCTION    OF   THE   CHURCH. 

THE  daily  bread  of  the  world  is  the  chief  subject 
of  political  economy.  If  men  were  purely  material, 
physical  nourishment  would  suffice  for  them ;  but 
spiritual  natures  require  spiritual  nutriment.  If  what 
furnishes  this  nutriment  were  a  purely  immaterial 
thing,  it  would,  as  such,  be  removed  from  the  domain 
of  wealth,  and  thus  from  the  field  of  economic  science ; 
but  it  is  not  so.  It  has,  in  fact,  a  material  basis,  and 
falls  within  the  limits  of  the  economist's  studies ;  the 
students  of  this  science  have  other  than  literal  loaves 
to  consider. 

The  consideration  of  forms  of  wealth  which  minister 
to  spiritual  wants  is,  indeed,  necessary  in  the  interest 
of  religion.  Certain  modern  religious  problems  need 
to  be  approached  as  well  from  the  material  as  from  the 
spiritual  side  ;  it  is  the  economist  who  can,  if  he  will, 
point  out  the  chief  danger  which  threatens  the  church. 
That  which  now  concerns  us  is  the  fact  that  such  a 
study  is  necessary  in  order  to  complete  the  science  of 
political  economy. 

We  have  already  noticed  the  wide  range  of  applica- 
tion which  current  definitions  of  wealth  must  have  if 


222      THE   ECONOMIC   FUNCTION   OF   THE  CHURCH. 

consistently  adhered  to.  While  wealth  always  has  a 
material  basis,  that  basis  is  not  necessarily  solid  or 
durable.  Vibrations  of  air  may  be  shaped  into  artistic 
form  by  the  violin  or  the  voice,  and  become  com- 
modities as  truly  as  the  stone  which  is  shaped  by  the 
sculptor's  chisel.  Such  products  as  musical  notes, 
perishable  as  they  are,  produce  lasting  effects  on  the 
mind,  and  are  valuable  accordingly  in  the  market. 
Concert  tickets  convey  a  title  to  them,  and  these  are 
not  to  be  had  without  money.  The  delicate  material 
commodities  which  diffuse  themselves,  for  a  time, 
through  the  concert  hall,  are  essential  to  the  spiritual 
effects  which  follow  from  their  use ;  there  could  be 
none  of  the  mental  effects  of  music  without  the  material 
undulations.  As  long  as  tremulous  air  thus  holds 
within  itself  the  power  to  impress  the  soul  of  man,  it 
is  subject  for  the  economist ;  it  is  his  business  to  investi- 
gate its  laws  as  wealth.  When  these  effects  exist  only 
as  impressions  on  the  mind,  he  may  turn  them  over  to 
the  metaphysician ;  they  are  commodities  no  longer. 
Bread  is  a  commodity  only  while  on  its  way  from  the 
oven  to  the  organ  of  digestion  ;  after  that  it  is  subject 
for  the  physiologist ;  and  that  form  of  bread  for  the 
mind  which  we  term  music  is,  in  like  manner,  a  com- 
modity only  while  in  transitu. 

Musical  forms  are  not  the  only  ones  that  can  be 
impressed  on  vibrations  of  air.  Marble  may  be  chiselled 
into  letters  as  well  as  images ;  and  air  vibrations  may 


THE  ECONOMIC   FUNCTION   OF  THE  CHURCH.     223 

be  shaped  into  forms  of  intelligence  as  well  as  into 
those  of  beauty.  Spoken  words  may  be  commodities 
in  the  market,  as  well  as  musical  notes.  They  are 
recognized  as  such ;  lecture  tickets  sometimes  convey  a 
title  to  them,  and  these  are  property,  sold  and  paid  for. 
A  preacher's  spoken  word  has,  in  like  manner,  its  place 
on  the  inventory  of  social  wealth;  sermons,  as  deliv- 
ered, are  property.  The  hymn  and  the  sermon  are  to 
be  regarded  as  forms  of  nutriment  for  the  soul,  which 
are  commodities  while  in  transitu  from  their  source  to 
the  organ  of  spiritual  digestion. 

Regarded  in  the  prosaic  light  of  economy,  church 
edifices  become  places  where  spiritual  nutriment  is 
disbursed.  Forms  of  wealth  which  minister  to  spiritual 
wants  are  here  produced,  distributed,  exchanged,  and 
consumed.  Economic  laws  are  general,  and  apply  to 
higher  as  well  as  lower  forms  of  wealth.  Spiritually, 
we  dine  in  commons,  on  the  cooperative  principle,  once 
a  week,  with  occasional  lunches  between  whiles.  The 
clergyman  is  a  minister,  in  that  he  provides  and  dis- 
tributes food.  In  former  years  the  meals  were  prepared 
with  Spartan  simplicity ;  but  of  late  they  have  been 
greatly  elaborated.  In  spiritual  as  in  physical  meals,  it 
is  the  appetizing  element  that  is  expensive ;  reduced 
to  simple  nutriment,  a  meal  of  either  kind  could  be  had 
very  cheaply. 

There  is,  then,  a  department  of  economic  science 
which  considers  forms  of  material  wealth  which  minister 


224      THE   ECONOMIC   FUNCTION   OF   THE   CHURCH. 

to  spiritual  wants.  The  relations  of  rich  and  poor  are 
alike  in  the  lower  and  the  higher  economic  depart- 
ments. The  highest  forms  of  wealth  have  their  laws  of 
distribution,  and,  in  the  course  of  social  development, 
large  classes  are  deprived  of  them.  The  laws  of 
spiritual  poor-relief  are  of  importance  to  the  economist. 

The  kind  of  spiritual  poor-relief  to  be  discussed  here 
does  not  fall  under  the  head  of  charity.  Place  a  dozen 
men,  each  in  his  own  boat,  on  the  open  sea,  and  start 
them  for  the  nearest  land.  They  are  on  an  equality 
and  completely  independent.  If  any  will  not  row,  his 
destruction  is  on  his  own  head.  If  any  try  to  row  and 
fail,  it  is  the  great  law  of  charity,  and  that  only,  which 
constrains  another  to  help  him.  If  any  venture  to 
burden  himself  by  towing  a  weaker  brother  to  the 
shore,  he  is  compelled  to  do  so  by  no  law  legal  or 
equitable,  but  the  universal  law  of  love. 

But  that  is  no  picture  of  actual  society.  No  man 
can  paddle  his  own  canoe  as  a  member  of  that  great 
social  organism  in  which  each  individual  labors,  not 
for  himself,  but  for  the  whole,  and  is  dependent  on  the 
whole  for  employment  and  for  pay.  Independence  is 
the  law  of  isolation  ;  interdependence  is  the  law  of 
society.  Again  and  again,  in  actual  history,  society 
ceases  to  desire  the  product  of  a  particular  man's 
labor.  The  organic  whole  is  in  the  position  of  em- 
ployer to  the  millions  who  work,  and  it  cannot  always 
keep  them  busy;  but  it  is  not  at  liberty  to  starve 


THE   ECONOMIC   FUNCTION   OF   THE   CHURCH.      225 

them.  It  may  take  away  their  comforts ;  but,  if  it 
take  their  lives,  it  is  murder.  Civilization  has  placed 
us  all  in  one  boat ;  by  mutual  help  we  are  sailing  the 
homeward-bound  ship  of  humanity.  He  who  will  not 
help  may  be  thrown  overboard,  possibly ;  but  he  who, 
by  force  of  circumstances,  cannot,  must  be  carried  to 
the  end. 

It  is  thus  in  the  nature  of  the  social  organism  that  the 
great  principle  of  English  law  which  asserts  the  ultimate 
right  of  every  man  to  a  maintenance  finds  its  philo- 
sophical ground.  That  is  an  evil  teaching  which 
ventures  to  question  this  principle,  and  it  would  fare  ill 
with  a  state  which  should  attempt  to  follow  such 
teaching  in  practice.  Such  action  would  surrender  to 
the  communists  the  championship  of  a  great  truth ;  it 
would  place  society  in  the  wrong,  and  revolutionists  in 
the  right. 

When  a  man  who  has  had  no  hand  in  getting  his 
neighbor  into  trouble,  lends  his  aid  in  getting  him  out, 
that  is  charity.  When  an  organized  society  relieves 
suffering  which  the  society  as  a  whole  has  caused,  that 
is  justice.  Whatever  part  of  the  poor-tax  goes  to 
relieve  sufferings  resulting  from  general  social  causes, 
is  paid,  not  given ;  the  claim  to  it  is  as  equitable  as  that 
of  any  officer  to  his  salary.  We  may  assume  as  a 
premise  the  principle  asserted  in  the  poor-law  of  Queen 
Elizabeth,  which  established  the  right  of  every  man, 


226      THE   ECONOMIC    FUNCTION   OF   THE   CHURCH. 

not  to  be  kept  in  idleness,  indeed,  but  to  be  kept,  while 
willing  to  work,  from  absolutely  starving. 

The  higher  nature  may  starve  as  well  as  the  lower ; 
and  the  duty  of  preventing  such  starvation  has  hereto- 
fore been  made  to  rest  mainly  on  spiritual  grounds,  and 
presented  as  a  high  order  of  charity.  We  place  it  on 
the  ground  of  justice.  The  soul  of  man  is  not  inde- 
pendent ;  the  organic  union  of  mankind  includes  mind 
as  well  as  matter,  and  it  is  its  nature,  in  every  relation, 
to  absorb  and  to  subordinate  the  individual  lives  which 
are  its  molecules.  He  who  is  born  into  such  a  society 
is  never  independent  in  body  or  mind. 

The  healthy  life  of  the  soul  of  individual  man  is  prac- 
tically dependent  on  material  aids;  the  higher  life  of 
the  social  organism  is  absolutely  so  dependent.  Inter- 
communication is  necessary  to  it.  Sometimes  by  im- 
pressing forms  of  intelligence  on  insubstantial  air, 
sometimes  by  printing  them  on  more  durable  paper, 
an  interchange  of  thought  and  feeling  is  established 
which  unites  the  life  of  individuals  into  a  single  whole ; 
it  gives  to  society  an  organic  soul. 

That  universal  society,  which,  without  any  reference 
to  particular  sects,  we  term  the  church,  controls  the 
material  aids  to  religious  life.  These  aids  are  forms  of 
wealth.  The  place  of  worship  with  its  furnishings,  the 
Bibles  and  books  of  song,  much  of  the  music,  and  most 
of  the  spoken  words,  are  property,  bought  and  paid  for. 
Economic  science  stops  at  nothing  in  asserting  its  juris- 


THE   ECONOMIC    FUNCTION    OF   THE   CHURCH.     227 

diction  over  what  really  belongs  to  it.  It  claims,  even 
to  the  farthest  echo,  the  sound  of  the  chimes  that  call 
the  worshippers  together,  when  the  paid  organist  rings 
them.  It  ventures  to  claim  the  material  instrument, 
air  vibrations  still,  by  which  the  prayers  of  the  assem- 
bled multitude  are  held  in  unison  and  made  to  become 
the  prayer  of  an  organic  whole.  There,  however,  its 
audacious  foot  halts.  The  prayer  itself  is  none  of  its 
property;  only  the  strictly  material  instrument  that 
expresses  it.  We  have  penetrated,  in  our  scientific 
temple,  to  the  Gentiles'  court,  where  buying  and  selling 
are  admissible ;  the  inner  sanctuary  we  may  not  enter. 

Living  not  by  literal  bread  alone,  but  by  spiritual 
impulses,  foot-pounds  of  dynamic  force  which  originate 
beyond  the  sphere  of  matter,  but  diffuse  themselves 
through  society  by  material  means,  man  may  starve 
spiritually  in  consequence  of  material  privation.  Such 
a  famine  is  an  economic  fact,  full  of  peril  even  to  the 
lower  interests  of  society.  The  duty  of  averting  it 
has  been  recognized  by  civilized  states,  and  a  free  dis- 
bursal  of  the  means  of  intellectual  and  aesthetic  culture 
has  partly  accomplished  this  end.  The  distinctively 
religious  portion  of  this  food  for  the  mind  has,  by  some 
governments,  been  included  in  the  public  disbursal. 
That  our  own  government  has  surrendered  this  function 
has  been  due,  not  to  any  undervaluation  of  the  end  to 
be  gained,  but  to  an  inability  to  gain  it  by  state  action. 

The  general  conservation  of  moral  energy  is,  indeed, 


228      THE    ECONOMIC    FUNCTION   OF   THE   CHURCH. 

not  altogether  surrendered  by  the  government;  codes 
of  law  are  efficient  educators.  The  religious  depart- 
ment of  popular  education  has  been  handed,  as  a  sacred 
trust,  to  voluntary  organizations ;  and  the  duty  rests  on 
them,  in  simple  fidelity  to  the  state,  of  continuing  that 
free  disbursal  of  the  highest  products  of  human  effort 
which  has  always  been  essential  to  the  public  welfare, 
and  which  is  becoming  doubly  so,  as  the  competitive 
forms  of  industry  diminish,  and  as  the  newer  processes 
of  distribution  increase. 

The  church  has  not  been  indifferent  to  this  trust ;  it 
is  the  great  giver  of  modern  times.  Not  a  week  passes 
that  it  does  not  scatter  its  valuable  products  through- 
out the  community.  That  which  costs  millions  of 
dollars  is,  in  this  way,  offered  without  reserve  to  who- 
ever will  take  it.  The  offer  is  not  wholly  rejected;  in 
the  evening  services  of  most  churches,  and  in  the  morn- 

O 

ing  services  of  many,  there  is  seen  a  free  disbursal  of 
the  products  on  which  the  state  is  becoming  more  and 
more  dependent.  Mere  denunciation  of  the  church  for 
delinquency  in  this  direction  is  as  mischievous  as  it  is 
unintelligent. 

It  is,  of  course,  to  be  expected  that,  like  the  other 
agencies  -which  dispense  rational  wealth,  the  church 
should  procure  what  it  disburses  in  the  ordinary  mer- 
cantile way.  The  cost  of  its  products  is  governed  by 
ordinary  laws.  It  must  pay  for  buildings,  furnishings 
and  books  the  prices  which  demand  and  supply  deter- 


THE   ECONOMIC   FUNCTION    OF   THE   CHURCH.      229 

mine.  It  must  hire  musicians  and  preachers  at  salaries 
which  the  tests  of  the  market  determine  for  their 
services.  It  is  the  disbursal  of  the  products  that  should 
not  be  competitive.  Here  the  principle  of  free  giving 
to  all  who  will  accept  should,  in  the  interest  of  society, 
prevail,  and  the  cost  should  be  defrayed  by  non-mer- 
cantile methods.  It  may  be  that  all  who  receive  the 
products  should  contribute  to  the  expense  of  creating 
them ;  but  they  should  not  buy  them,  and  should  cer- 
tainly not  buy  the  spiritual  nutriment  which  the  church 
offers  in  a  vitiated  form,  or  in  combination  with  a  base 
element  attached  to  it  for  the  purpose  of  making  it 
saleable.  This  method  of  corrupting  the  merchandise 
of  the  church  we  shall  examine. 

The  present  industrial  condition  has  come  suddenly 
upon  society ;  and  it  is  partly  for  this  reason  that  the 
interaction  of  economic  and  spiritual  forces  has  only 
begun  to  receive  attention.  The  trend  of  the  old 
political  economy  was  in  the  reverse  direction ;  and  we 
are  but  just  becoming  fully  conscious  that  the  industrial 
system  depends  absolutely  on  moral  influences,  and 
that  these  depend  on  material  aids. 

Even  recent  and  valuable  studies  of  the  causes  which 
have  alienated  workingmen  from  the  church  have 
failed  to  present  clearly  the  distinctively  economic 
element  in  the  situation.  This  element  is  all  that 
it  is  either  desirable  or  legitimate  to  present  here. 
Certain  causes  have  vitiated  the  highest  products 


230      THE   ECONOMIC   FUNCTION    OF   THE   CHURCH. 

of  human  effort,  and  have  changed  for  the  worse  the 
mode  of  disbursing  them.  A  low  mercantile  principle 
has,  in  an  insidious  way,  acquired  a  degree  of  control 
over  one  department  of  church  activity.  Without  the 
conscious  acquiescence  of  the  members  of  the  church, 
and,  of  late,  even  against  their  wishes  and  efforts,  the 
organization  has  become  entangled  in  the  meshes  of 
the  commercial  system  which  environs  it,  and  so  ceased 
to  be,  to  the  extent  which  the  public  interest  demands, 
the  free  disburser  of  rational  wealth. 

The  causes  and  the  effects  of  this  half-unconscious 
breach  of  trust  fall  partly  within  the  limits  of  economic 
study.  There  is  difficulty  inherent  in  the  plan  of 
maintaining  different  social  classes  at  the  same  table, 
literal  or  spiritual.  Under  a  regime  of  Spartan  sim- 
plicity a  community  may  be  conceived  of  as  dining 
literally  in  commons ;  but  it  is  Spartan  broth  that  they 
would  get.  Repeal  the  wise  laws  of  Lycurgus  against 
luxury,  and  the  rich  will  soon  have  a  table  to  them- 
selves ;  and  the  manner  in  which  this  will  come  about 
illustrates  what  is  occurring  at  our  spiritual  dining- 
table.  With  gold  in  his  pocket,  instead  of  corroded 
iron,  a  Spartan  communist  would  want  something  bet- 
ter than  barley  soup.  Under  such  circumstances  the 
quality  of  the  food  would  be  likely  to  be  improved. 
Under  the  influence  of  strong  fraternal  feeling  the 
poor  might  remain  for  a  time ;  but  to  pay  their  share 
would  be  burdensome,  and  to  remain  as  beneficiaries 


THE   ECONOMIC   FUNCTION   OF   THE   CHURCH.     231 

would  be  irksome.  They  would  gradually  withdraw, 
and  each  withdrawal  would  facilitate  the  process  of 
improving  the  quality  of  the  meal  and  increasing  its 
expense.  The  process  would  naturally  continue  until 
the  wealthy  should  be  left  alone  in  the  enjoyment  of  an 
elegant  and  costly  entertainment. 

Such  a  case  is  ideal ;  but  it  becomes  actual  when  we 
consider  not  physical  but  spiritual  living.  The  Puritan 
church  of  America  lived  in  voluntary  commons,  in 
extreme  simplicity.  Its  spiritual  diet  was  nourishing, 
but  the  opposite  of  luxurious.  Two  centuries  have 
seen  the  growth  of  differences  of  wealth,  the  adoption 
of  a  more  luxurious  spiritual  table,  and  the  withdrawal 
of  a  majority  of  the  poor. 

The  introduction  of  costly  elements  into  religious 
services  might  not  have  been  a  vitiating  element  in  the 
disbursal  of  moral  nutriment,  had  the  needed  revenue 
come  from  the  public  treasury.  It  appears  not  to  have 
that  effect  in  the  Roman  Catholic  church  of  European 
countries.  The  revenue  system  of  the  American 
Protestant  church  is  the  peculiar  product  of  a  mercan- 
tile age.  It  is  not  too  much  to  say  that  this  organization 
has,  in  comparative  unconsciousness,  developed  the 
most  unworthy  form  of  mercantilism  which  the  old 
economic  regime  has  brought  into  existence.  The  com- 
petitive system,  in  its  latter  days,  has  laid  an  evil  hand 
upon  the  activities  of  the  church. 

We  noticed,  in  an  early  chapter  of  this  book,  the 


232     THE   ECONOMIC   FUNCTION    OF    THE   CHURCH. 

dominant  influence  of  fashion  in  the  production  and 
sale  of  many  utilities.  The  product  which  has  a  caste- 
making  power  becomes  thereby  an  object  of  intense 
desire.  The  costliest  products  of  nature  and  art  com- 
mand their  price  because  they  act  as  badges  of  social 
station.  Give  to  the  homeliest  article  of  common 
necessity  a  supplementary  power  to  mark  its  possessor 
as  a  superior  atom  in  the  social  organism,  and  he  will 
pay  a  high  price  for  it.  The  garment  that  is  cut 
according  to  the  latest  mode  appeals  to  a  simple  natural 
want  and  to  personal  vanity  at  the  same  time.  The 
jewel  that  is  to-day  in  vogue  satisfies  an  aesthetic  want 
which  counts  as  one,  and  an  ambitious  craving  which 
counts  as  ten,  in  the  determining  of  its  market  value. 
Each  of  these  products  is  a  composite  of  rational  utility 
and  vanity;  and  each  depends  on  the  latter  element 
for  its  costliness. 

The  church  makes,  i'or  financial  reasons,  a  similar  com- 
bination ;  and  the  disastrous  feature  of  the  process  is 
that  the  baser  and  costlier  element  here  vitiates  the 
better  one.  The  church  does  not  literally  sell  the 
gospel ;  it  practically  gives  it  away,  and  gets  a  revenue 
from  the  base  tinsel  which  it  combines  with  it.  It 
rents  pews,  and  so  grades  them  as  to  appeal  to  the 
same  subtle  weakness  of  human  nature  which  gives  a 
high  market  value  to  everything  which  has  a  caste- 
making  power.  He  who  pays  for  one  pew  ten  times 
the  price  that  would  secure  another  differently  located 


THE  ECONOMIC   FUNCTION   OF    THE   CHURCH.      233 

pays  little  or  nothing  for  spiritual  nutriment ;  he  pays 
something  for  comfort,  and  much  for  the  gratification 
of  that  subtle  ambition  which  everywhere  craves  the 
high  places  in  the  social  gradation.  The  proceeding 
draws  lines  of  caste,  in  indefinite  number,  throughout 
the  audience-room,  and  invokes,  for  the  purpose  of 
raising  a  revenue,  a  spirit  which  is  well  known  to  be 
fatal  not  only  to  the  success  of  the  spiritual  work  for 
which  the  church  was  founded,  but  also  to  the  success 
of  the  work  which  the  state  demands  of  it  in  the  new 
industrial  era. 

If  a  new  and  higher  type  of  industrial  organization 
shall  develop  from  the  present  chaotic  condition,  it  will 
be  one  that  will  have,  as  its  distinctive  principle,  frater- 
nity among  men.  It  will  harmonize  warring  elements, 
and  enable  humanity  to  live  by  accepting,  as  a  great 
family,  the  bounty  of  nature,  working  in  harmony  and 
dividing  the  fruits  of  labor  in  peace.  As  the  fountain- 
kead  of  the  chief  moral  and  spiritual  influence,  the 
church  should  be  the  great  unifier,  the  principal  author 
of  that  fraternal  spirit  on  which  higher  industrial  de- 
velopment depends.  It  is,  in  fact,  the  -promoter  of 
class  antagonism;  by  its  method  of  gaining  a  revenue 
it  is  widening  the  gulf  that  needs  to  be  closed. 

A  church  that  openly  appeals  to  the  caste  spirit  de- 
stroys its  power  to  assimilate  the  multitude  for  whose 
welfare  it  exists,  loses  its  vitalizing  principle,  and 
becomes  a  lump  which,  though  in  itself  it  were  manna, 


234     THE   ECONOMIC   FUNCTION    OF   THE   CHURCH. 

will  not  leaven  a  measure  of  meal,  though  it  lie  hidden 
in  it  forever.  Wiser  than  the  children  of  light  are  the 
members  of  the  friendly  societies,  secret  orders,  and 
trades  unions  which  modern  economic  tendencies  have 
developed.  Whatever  of  moral  nutriment  they  dis- 
burse they  scatter  among  their  members  on  a  demo- 
cratic principle.  The  church  must  do  likewise  or 
surrender  its  moral  leadership.  It  must  fight  the 
caste-making  tendency  as  it  would  the  Spirit  of  Dark- 
ness, and  not  foster  it,  Demas-like,  for  the  revenue 
which  it  offers. 

Entering  on  a  course  that  is  as  full  of  peril  as  it  is  of 
promise,  society  demands  that  every  moral  agency  shall 
be  in  the  fullest  working  order.  Least  of  all  can  it 
dispense  with  the  work  that  addresses  itself  directly  to 
the  personal  character  of  individual  men.  Everywhere 
we  hear  the  appeal  to  the  church,  as  the  agent  that 
can  most  efficiently  aid  in  the  economic  redemption  of 
humanity.  There  can  be  no  retreat  in  the  general 
course  of  moral  progress  upon  which  the  world  has 
lately  entered ;  and  institutions  as  well  as  men  are  to 
be  sifted  by  it.  "  On  earth  peace  ;  "  such  is  the  fruit 
by  which  we  are  to  know  a  church  that  is  true  to  the 
mission  for  which  it  was  founded.  Fraternity  is  the 
result  and  the  test  of  true  Christianity 'working  through 
sound  economic  forms.  This  test,  if  intelligently  ap- 
plied, will  be  found  to  condemn,  not  the  spirit  of  the 
church,  but  its  outward  methods.  That  the  organiza- 


THE   ECONOMIC   FUNCTION   OF    THE   CHUKCH.       235 

tion  which  now  broadens  the  gulf  between  social  classes 
may  become  the  chief  agent  in  closing  it,  there  is 
needed,  not  the  miracle  of  a  totally  new  spirit  among 
its  members,  but  the  adoption  of  outward  forms  less 
mercantile  than  those  now  prevalent,  and  more  in 
harmony  with  the  new  economic  era. 

It  is  sometimes  said  that  men  must  be  actuated  in  all 
their  dealings  by  Christian  love,  if  the  labor  question  is 
ever  to  be  settled.  This  is  demanding  a  transformation 
of  human  nature,  and  is  equivalent  to  abandoning  the 
hope  of  securing  a  favorable  issue  of  the  contests  now 
in  progress  by  means  of  forces  at  present  available. 
Humanity  is  approaching  the  Christian  ideal  surely 
and  not  always  slowly ;  it  will  be  nearer  to  it  next  year 
than  it  is  now,  and  it  will  doubtless  be  appreciably 
nearer  to  it  when  the  next  generation  is  upon  the  field 
of  action.  More  generations  must  pass  than  any  one 
can  estimate  before  the  ideal  will  be  fully  attained; 
and  in  the  meanwhile  the  social  conflict  is  upon  us. 
Have  we  nothing  to  oppose  to  the  brute  forces  that,  in 
a  night,  as  it  were,  have  sprung  into  full  activity,  ex- 
cept the  margin  of  moral  improvement  which  an  inter- 
val of  waiting  and  working  may  secure  ? 

It  is  the  duty  of  the  economist  to  study  social  forces 
as  they  are,  or  at  least  as  they  will  be  in  the  near 
future.  Influences  which  ought  now  to  exist,  and 
which  will  exist  in  a  millennial  age,  are  not  material 
for  present  economic  calculation.  The  characteristic  of 


236      THE   ECONOMIC   FUNCTION   OF   THE    CHURCH. 

the  changes  in  actual  progress  in  the  business  world  is 
the  liberation  of  moral  energy ;  an  existing  force  has 
been  unfettered  by  the  industrial  revolution.  The  com- 
petitive system  in  its  degenerate  form  held  under  repres- 
sion a  limitless  moral  power  which  the  better  system 
now  developing  is  already  beginning  to  call  into  action. 
The  church  is  the  natural  conservator  of  this  force,  not 
only  within  the  limits  of  its  membership,  but  in  society 
at  large.  In  many  ways  it  diffuses  the  spiritual  impul- 
ses that  are  communicated  to  it ;  and  while  this  work 
still  has,  as  its  chief  end,  the  moulding  of  character  it- 
self, it  has,  as  a  secondary  end,  the  improvement  of  the 
economic  relations  of  men.  The  church  wields  a  pri- 
mary force  in  the  new  economic  system,  and  is,  to  that 
extent,  an  arbiter  of  men's  earthly  fortunes.  In  a  lit- 
eral sense  its  field  is  the  world;  and  while  it  may 
hasten  the  advent  of  earthly  peace  by  gathering  men 
more  rapidly  into  its  spiritual  fold,  it  may  also  hasten 
the  spiritual  work  by  promoting  outward  harmony.  To 
a  certain  extent  the  higher  service  waits  on  the  lower, 
and  for  the  sake  of  every  interest  entrusted  to  its  keep- 
ing the  church  is  called  upon  to  use  the  economic 
power  entrusted  to  it. 


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